CONSTITUTIONAL AMENDMENT #2

3.5% Maximum State Income-Tax Rate

BOTTOM LINE

This amendment proposal is not an ordinary tax cut. It does NOT lower North Carolina’s current individual income-tax rate to 3.5%.

North Carolina’s Constitution currently says the income-tax rate cannot exceed 7%. If passed, the proposed amendment would reduce that constitutional ceiling by half — from 7% to 3.5%. The ceiling would apply to both personal and corporate income taxes.

The central question here isn’t simply whether North Carolina should have lower taxes. It is:

Should today’s voters constitutionally prevent future elected legislatures from raising the state income-tax rate above 3.5% even if future economic, fiscal or emergency circumstances cause them to believe that is necessary?

OVERVIEW

Article V of our current State Constitution says: “The rate of tax on incomes shall not in any case exceed seven percent.” The proposed Amendment’s ballot language reads: “Constitutional amendment to keep the State income tax rate from being raised higher than three and one-half percent (3.5%).”

If voters approve the proposed Amendment, the new constitutional maximum would apply to taxable years beginning January 1, 2027, and would apply to both individual and corporate income taxes.

It’s important to note that the proposed Amendment does not cut the current tax rate from 7% to 3.5%. The 7% figure isn’t what North Carolinians are currently paying. It is the maximum rate the legislature is currently constitutionally allowed to impose. So what is our current income tax rate?

The individual income-tax rate is 3.99% in 2026 and is already scheduled under state law to fall to 3.49% in 2027, 2028 and 2029. Then it will fall again to 3.24% for 2030 through 2032 and 2.99% beginning in 2033. The corporate income-tax rate is 2% in 2026 and 2027, 1% in 2028 and 2029, and is scheduled to reach zero beginning in 2030.

So the proposed amendment isn’t about lowering today’s tax bill. It is about restricting how far a future General Assembly could reverse the state’s current low-income-tax policy.

In fact, the General Assembly’s own Fiscal Research Division concluded that SB1080 itself would have “No Fiscal Impact.” Its May 2026 analysis explained that the personal and corporate rates were expected to be below the proposed 3.5% ceiling when the Amendment, if passed, will take effect.

Ordinary legislation can be changed by another legislature. A constitutional ceiling cannot be changed by ordinary legislation. If the Amendment passes and a future legislature wanted an income-tax rate above 3.5%, another constitutional amendment would have to be submitted to voters.

SOURCES: North Carolina General Assembly, Session Law 2026-4; legislative summary of SB1080; Fiscal Research Division fiscal note; 2026 Appropriations Act tax-rate summary.

WHAT SUPPORTERS SAY

Supporters describe the amendment as protection against future tax increases. Their argument is that North Carolina’s move toward lower income taxes has helped make the state more economically competitive and that taxpayers and businesses should have greater certainty that a future General Assembly cannot substantially reverse that policy.

During Senate Finance discussion of the Amendment, Sen. Ralph Hise cited North Carolina’s competition with Tennessee — which has no individual income tax — and said he fundamentally disagrees with the concept of a state income tax.

When Sen. Natalie Murdock questioned why a constitutional amendment was necessary when legislators were already lowering income taxes through ordinary legislation, sponsor Sen. Michael Lee said lawmakers had made a promise to voters to reduce taxes. If a future legislature wanted to reverse that commitment, he said, it should first have to “check in” with voters.

Lee’s answer makes what he claims is an essential purpose of the constitutional amendment particularly clear: a future legislature wanting to raise the rate above 3.5% would first have to put another Constitutional Amendment before the voters.

SOURCE: NC Newsline, May 18, 2026; WUNC, May 19, 2026; North Carolina General Assembly, SB1080.

WHAT OPPONENTS SAY

Opponents don’t necessarily have to favor a 7% income-tax rate — or any higher rate — to oppose this amendment. Their argument is that tax policy needs to be flexible to change with circumstances, while constitutions are deliberately difficult to change.

A future General Assembly could confront circumstances that today’s legislature cannot predict: a major recession or financial crisis; a catastrophic hurricane or flood; large new state obligations; changes in federal funding; new education or infrastructure requirements; or some combination of them.

Under ordinary legislation, lawmakers could respond using some combination of spending reductions, borrowing, and revenue changes. Under this amendment, however, raising the income-tax rate above 3.5% would no longer be an immediately available option. Voters would first have to approve another constitutional amendment.

Critics also argue that limiting the state’s ability to raise income-tax revenue through this Amendment could increase pressure to cut state spending or rely more heavily on other revenue sources, which can shift costs or tax burdens in different ways.

SOURCES: WUNC and WRAL reporting on SB1080 debate; North Carolina General Assembly, Session Law 2026-4.

SB1080

The current proposed amendment originated as Senate Bill 1080, titled “Lower Taxes for All NC.” Its primary sponsors were Republican Sens. Michael Lee, Benton Sawrey and Lisa Barnes, joined by numerous Republican cosponsors.

The legislative debate repeatedly returned to the difference between changing tax rates by statute versus putting a ceiling into the Constitution. Today’s legislature can already lower tax rates by ordinary law. The amendment asks us whether a future legislature should have to return to voters before raising the income-tax rate above 3.5%.

The Senate ultimately passed the measure 30–18. The House passed it 73–46. It was ratified May 21, 2026, becoming Session Law 2026-4.

SOURCES: North Carolina General Assembly, SB1080 bill history, Senate Roll Call #535, House Roll Call #664, and Session Law 2026-4.

THE DISASTER QUESTION WASN’T HYPOTHETICAL FOR LEGISLATORS

One of the most revealing moments in the Amendment’s legislative history came when Sen. Kandie Smith proposed an amendment addressing major disasters. Her proposal would have allowed the General Assembly to exceed the 3.5% ceiling during the two fiscal years following North Carolina’s inclusion in a federal major-disaster declaration. Smith specifically invoked Hurricane Helene and other North Carolina disasters while arguing for the exception.

The Senate ruled her amendment out of order. It therefore did not become part of the constitutional amendment sent to voters, and the final constitutional language contains no disaster exception.

In our mountains, the implications of a major-disaster exception hardly require much imagination. We’ve been there.

SOURCES: North Carolina General Assembly, Smith Amendment A1 to SB1080 (S1080-ABA-42-v-7) and SB1080 bill history; WRAL, May 2026.

OTHER ALTERNATIVES WERE PROPOSED AND FAILED TOO

Senators also proposed changing how the constitutional restriction would apply across income groups.

Sen. Lisa Grafstein proposed eliminating personal income taxes for individuals earning less than the state’s median income. Sen. Sydney Batch proposed making the 3.5% ceiling inapplicable to individuals in the top 1% of earned income, leaving the General Assembly to determine by statute the rate that would apply to that income.

Both amendments were tabled. What we are served up instead is the same 3.5% ceiling for income covered by the constitutional provision, without either of those exceptions.

SOURCES: North Carolina General Assembly, Grafstein Amendment A2 (S1080-ABA-41-v-4), Batch Amendment A3 (S1080-ABA-40-v-4), and SB1080 bill history.

WHAT THE AMENDMENT’S BALLOT LANGUAGE DOESN’T TELL US

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

The ballot language doesn’t tell us that the existing constitutional ceiling is 7%. It doesn’t tell us that the Amendment is not reducing the current tax rate from 7% to 3.5%. It doesn’t tell us that the ceiling applies to corporate as well as individual income taxes. And, perhaps most importantly, it doesn’t tell us that actual individual and corporate income-tax rates are already below — or scheduled to fall below — the proposed 3.5% ceiling.

EVEN THE OFFICIAL VOTER EXPLANATION DOESN’T TELL US WHAT WE NEED TO KNOW

The Legislative Services Office (LSO) of the North Carolina General Assembly is the administrative and support agency that runs the day-to-day operations of the state legislature. State law requires the Legislative Services Officer to prepare an explanation of every proposed constitutional amendment in “simple and commonly used language” at least 75 days before the election.

The official Legislative Services Officer explanation for this amendment tells voters: “This amendment to the North Carolina Constitution would lower the State income tax rate from a maximum of 7% to a maximum of 3.5% beginning January 1, 2027.” That explanation does provide one important fact missing from the ballot: 7% is the existing constitutional maximum. But it still doesn’t tell voters that the actual individual income-tax rate is 3.99% in 2026 and is already scheduled to fall to 3.49% in 2027, nor that the constitutional ceiling applies to corporate income taxes too.

SOURCES: G.S. 147-54.10; 2026 Legislative Services Officer constitutional-amendment explanation; North Carolina General Assembly tax-rate statutes and summaries.

ANOTHER LOOK UNDER THE HOOD OF THIS AMENDMENT

This isn’t North Carolina’s first constitutional amendment lowering the income-tax ceiling. Before 2018, the North Carolina Constitution permitted a maximum income-tax rate of 10%. Voters approved a 2018 constitutional amendment reducing that ceiling from 10% to 7%. The current Amendment proposal continues that progression:

Before 2018: 10% maximum
2018 amendment: 7% maximum
2026 proposal: 3.5% maximum

Meanwhile, the General Assembly has actually already been reducing actual income-tax rates through ordinary legislation.

So two different legal approaches have been operating at the same time: ordinary legislation determines the rate being charged now; constitutional amendments lock in the maximum rate future legislatures are allowed to charge.

SOURCES: North Carolina General Assembly, Session Law 2018-119; Session Law 2026-4; 2026 Appropriations Act.

WHAT DOES PUTTING 3.5% IN THE CONSTITUTION MEAN?

I think it’s ultimately useful to think about Amendment #2 this way: A voter could strongly favor North Carolina’s present low-tax policy and still ask whether 3.5% belongs in the Constitution. Likewise, someone could favor greater government revenue and nevertheless recognize the argument that fundamental fiscal restraints should require direct voter approval to change.

But those are separate questions from whether anyone likes paying taxes.

North Carolina voters already made one judgment in 2018 that an income-tax ceiling belongs in the Constitution. The question now is how restrictive that ceiling should be. But it’s important to note that at 7%, there is considerable play between today’s tax rates and the constitutional maximum. At 3.5%, there isn’t.

SO WHAT ARE WE THE VOTERS REALLY DECIDING?

Not simply: “Would you like lower taxes?” The General Assembly can, and already does, lower tax rates through ordinary legislation. The constitutional question is: “How difficult should it be for a future North Carolina government to raise income taxes?”

Supporters say a future legislature wanting to exceed 3.5% should have to return to the people and obtain permission through another constitutional amendment. Opponents say future elected governments should retain enough fiscal flexibility to respond to circumstances that voters and lawmakers in 2026 cannot foresee.

And it brings us back to the question at the top:

Should today’s voters remove the option of an income-tax rate above 3.5% from future elected legislatures unless North Carolina voters first amend the Constitution again? I say “NO” and am voting “AGAINST.”