North Carolina voters approve tighter income tax cap

The new ceiling replaces the 7% cap voters approved in 2018. North Carolina currently has a 3.99% flat income tax rate for all earners, and that rate is scheduled to fall in the coming years. The Republican-led General Assembly put the amendment on the ballot over objections from Democratic lawmakers.

The vote came amid widespread concern among voters about the cost of living. Some 48% of registered voters said the cost of living was the top issue for deciding how they would vote, according to a Reuters/Ipsos poll. Housing makes up a big part of that concern: the median existing single-family home price reached $422,700 in September, up 1.2% compared with a year earlier, according to the National Association of Realtors, while the average 30-year mortgage rate reached 7.24% in late October, up from 6.17% at the same time last year. Property taxes rose 3% compared with last year and now stand at about $4,427 annually, according to ATTOM.

Republican state Sen. Michael V. Lee, who sponsored the legislation, argued earlier this year that the cap protects taxpayers from future increases and locks in more than a decade of tax cuts. Democratic Gov. Josh Stein opposed the amendment, calling it "a con, a cynical shell game and a millionaire protection cap." He argued it would shield the wealthy from future income tax increases while regular people bear the cost.

A separate constitutional amendment on property taxes, which was still being counted late Tuesday, also had the support of the General Assembly's Republican majority. It would not immediately reduce property taxes, but would require the legislature to pass a law limiting the amount of property tax a local government can raise from one year to the next, with the specific limit and exceptions to be decided at a later date.

Proponents said the property tax amendment would help people stay in their homes and ease the burden on homeowners. Opponents said it would restrict local governments' revenue growth, potentially forcing them to cut services, and would have a bigger effect on large corporations than on individual homeowners. State Rep. Brian Echevarria, a primary sponsor of the legislation, wrote in an opinion piece last year that property tax increases based on property reevaluations amount to a "tax on unrealized gains," which he argued is unfair for homeowners, especially in fast-growing areas that have seen property tax rates increase significantly in recent years.

The North Carolina Housing Coalition, which opposes the measure, says a limit on property taxes would translate to limited savings for homeowners while corporate property owners see millions in tax savings. According to an analysis by the coalition, if a 2% levy cap had been in place during the latest revaluation cycle, the average homeowner would have saved $84 a year, while local government revenue would have fallen by $950 million.

Property taxes in North Carolina account for more than half of county general fund revenue, according to the North Carolina Association of County Commissioners, money that helps pay for services such as healthcare, education and transportation. David Clegg, the county manager of rural Tyrrell County in eastern North Carolina, told NC Newsline in May that the measure could deprive the 3,000-person county of needed revenue. "Tyrrell County is providing the baseline human services and quality of life services that just keep us going," Clegg told the outlet. "If you start cutting at that all of a sudden, you're cutting social services, law enforcement, health, emergency medicine because there's nothing else to cut."

Voters on Tuesday weighed in on 15 measures across nine states dealing with property taxes, according to the National Conference of State Legislatures. In Florida, voters approved an amendment that expands homestead exemptions for non-school property taxes to $250,000 by 2028, while Oklahoma considered tightening limits on how quickly property values can rise for tax purposes.