Senate goes along with House, puts income tax cap of 7 percent on November ballot

Voters will decide this fall whether North Carolina taxpayers should receive protection in the state constitution against the state taxing more than 7 percent of their personal income.

In a bit of a surprise, the Senate voted 33-14 Thursday, June 28, to concur with a change the House made earlier in the day to Senate Bill 75, capping the income tax rate at 7 percent. The Senate version set the maximum rate at 5.5 percent. The maximum rate now allowable is 10 percent.

The constitutional amendment will appear on the Nov. 6 general election ballot.

Senate Republicans have backed a lower 5.5 percent cap since initially passing the bill in March 2017, and sending it to the House. When the bill finally reached a House floor vote on Wednesday, it contained the higher tax ceiling as a compromise.

Sen. Jerry Tillman, R-Randolph, a co-chairman of the Senate Finance Committee and proponent of the 5.5 percent tax rate, on Wednesday said “hell no,” the Senate would not agree to the House’s higher income tax ceiling. When senators began debate on the House version Thursday it seemed that might be the chamber’s prevailing Republican opinion.

“I won’t vote to concur,” said Sen. Tommy Tucker, R-Union, also a co-chairman of the Finance Committee. “I believe that 5.5 percent is where we could have had the opportunity once and for all to implement fiscal discipline,” Tucker said. “We don’t have a taxing problem here in North Carolina, we have a spending problem.”

“It would better if we could cap the income tax at 5.5 percent. I think that would be better,” said Senate leader Phil Berger, R-Rockingham.

“But I also think that moving the maximum income tax rate from 10 percent down to 7 percent is progress, just not as much. That is as far as the House would go,” Berger said. 

In a statement released after the vote, Berger said:

North Carolina had some of the highest taxes in the Southeast when Democrats controlled the legislature. Legislative Republicans have substantially reduced the tax burden and put more money back into the pockets of hard-working families and businesses. With this amendment, voters can say no to a return to the days of spendthrift politicians, high taxes and multibillion-dollar deficits by placing this protection in our state constitution.