Amendment 2: A 3.5% Ceiling on the State Income Tax

By the Editorial Team · Friday, October 23, 2026

Voters will decide whether to lower the constitutional cap on North Carolina’s state income tax from 7% to 3.5%, preventing future legislatures from raising the rate above that limit without further voter approval starting in 2027. Supporters say this guarantees tax predictability and fiscal discipline, while opponents warn it could restrict necessary revenue during emergencies and shift the tax burden onto other forms of taxation.

AMENDMENT 2 • SENATE BILL 1080

A 3.5% ceiling on the state income tax

On the ballot: “Constitutional amendment to keep the State income tax rate from being raised higher than three and one-half percent (3.5%).”

What is true today

The constitution today caps the state income tax rate at 7% - a ceiling voters lowered from 10% in 2018. The actual flat individual rate is set by ordinary law, not by this amendment: it is 3.99% in 2026 and is already scheduled under current law to fall to 3.49% in 2027 and lower in later years (2.99% in 2028 in the enacted schedule, with further trigger-based cuts possible). If approved, the 3.5% ceiling would apply to tax years beginning January 1, 2027.

This is the only one of the three amendments that restricts a tax to a specific percentage: 3.5%. It is a maximum, not a promise of what anyone will pay, and it concerns the state income tax - it does not by itself set sales, corporate, or property taxes.

A FOR vote means you support lowering the constitutional maximum from 7% to 3.5%, so no future legislature could raise the rate above 3.5% without another constitutional amendment approved by voters.

An AGAINST vote means the ceiling stays at 7%. The scheduled statutory rate cuts still happen; lawmakers keep the option to set a rate anywhere up to 7% by ordinary law.

Supporters argue

Taxpayer protection: voters, not just legislators, should have to approve any move back to higher income taxes.

Predictability and competitiveness: a low, durable ceiling helps families and businesses plan, and supporters credit more than a decade of rate cuts for North Carolina’s strong rankings as a place to do business.

It locks in progress: the rate is already heading below 3.5%, so the amendment preserves that direction.

Discipline: a cap encourages the state to live within a known revenue limit and control spending growth.

Critics argue

No immediate tax cut: the amendment does not lower this year’s bill; the rate is already scheduled to fall below the cap without it.

Less room in a downturn or disaster: a future legislature facing a recession, hurricane recovery, or rising costs could not raise income tax above 3.5% even temporarily, without a statewide vote.

Schools and services: income tax provides about half of the state General Fund; critics, including the governor and education groups, warn a hard ceiling could force cuts or deficits over time.

Shift, not saving: if income tax is capped, pressure may move to sales taxes, fees, or local taxes, which critics say fall more heavily on lower-income households. A flat-rate cap also benefits higher earners most in dollar terms, critics add.

Immediate effect: a future ceiling, not a cut. Your 2026 rate stays 3.99% either way, and the drop to 3.49% in 2027 is already in law. What changes is the highest rate any future legislature may choose - 3.5% instead of 7%.

Question to consider: Do you want today’s low-rate direction made permanent, or do you want future elected officials - who will face circumstances no one can foresee - to keep the wider range the constitution allows today?

This is an opinion piece and reflects the views of its author, not a news report. Read about our editorial standards. Spotted an error? Let us know.