North Carolina voters approve tax limits on income and property as cost of living tops voters’ worries

As housing prices increase nationwide and Americans increasingly voice their frustration with affordability, voters in North Carolina have approved a constitutional amendment that lowers the state’s income tax cap from 7% to 3.5%.

The Associated Press called the race at 9:21 p.m. Tuesday, with 61% of votes in favor and 89% of votes counted, according to WBTV. The amendment bars the General Assembly from raising the income tax rate above 3.5% unless voters approve another constitutional change. 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 new ceiling replaces the 7% cap voters approved in 2018. The Republican-led General Assembly put the amendment on the ballot over objections from Democratic lawmakers.

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 North Carolina General Assembly’s Republican majority. It would not immediately reduce property taxes, but would require the legislature to pass a law that would limit the amount of property tax a local government can raise from one year to the next, with details like the specific limit and exceptions to be decided by the state legislature at a later date.

In the run-up to the midterm election Tuesday, proponents said the property tax amendment would help people stay in their homes and would ease the burden on homeowners. Opponents of the constitutional measure, meanwhile, 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 that put the constitutional amendment on the ballot, 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.

Meanwhile, opponents, including the North Carolina Housing Coalition claim that 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 their latest property revaluation cycle, the average homeowner would have saved $84 a year, while local government revenue would have plummeted by $950 million.

The income tax cap comes 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.

The price of 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 to a year earlier, according to the National Association of Realtors. Meanwhile, the average 30-year mortgage rate reached 7.24% in late October, up from 6.17% at the same time last year, increasing borrowing costs for homebuyers.

As Americans increasingly struggle to afford a home, those who already own one are also dealing with higher property taxes, which increased 3% compared to last year and now stand at about $4,427 annually, according to U.S. real estate and property data provider ATTOM.

National debate

The same affordability concerns that helped fuel Tuesday’s North Carolina vote also gave rise to other property tax-related measures in other states.

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. In Oklahoma, voters also considered tightening limits on how quickly property values can rise for tax purposes, including reducing the cap for qualifying homes from 3% to 1.75%.

The debate over property taxes has been contentious across several states for decades. 

In 1980 Massachusetts passed Proposition 2½, which has generally limited annual increases in municipal property-tax levies to 2.5%, plus revenue from new development since it went into effect in 1982. The law allows municipalities to seek voter-approved overrides.

Critics have said the proposition prevents local governments from raising the revenue they need to fund services as costs increase. Still, a 2025 poll by the Fiscal Alliance Foundation, which advocates for lowering taxes, found that 66% of 800 likely voters in Massachusetts viewed the measure favorably. 

Uncertain savings

At the same time, the push for tax relief in several states also raises questions about how cities and counties will finance the government services that citizens rely on.

Property taxes in North Carolina account for more than half of county general fund revenue, according to the North Carolina Association of County Commissioners. This fund helps pay for government services like healthcare, education, and transportation services.

Individual homeowners could still see their tax bills increase following property reassessments, even with limits put in place by the General Assembly at a later date.

Yet, because the constitutional amendment leaves undecided it’s hard to estimate the financial impact a property tax limit would have on local governments.

Still, local officials in some smaller counties have said they will be disproportionately affected by a uniform limit on property tax growth.

That includes David Clegg, the county manager of rural Tyrrell County in Eastern North Carolina, who 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.”

This story was originally featured on Fortune.com