by Paige Terryberry
Senior Analyst for Fiscal Policy, John Locke Foundation
The NC Senate signaled their intentions Wednesday to aggressively lower the state’s personal income tax rate.
The current year’s tax rate is 4.75% with decreases scheduled that would bring it to 3.99% after 2026. SB 651, titled “Tax Relief for All” would lower the tax rate to 2.49% after 2026. The first decrease would apply retroactively to the current year, bringing our present rate down to 4.5%. In 2024 the rate would drop to 3.99%.
This is more aggressive than the personal income tax cuts unveiled in the NC House budget proposal last week. Under that proposal, the rate would decrease to 4.5% one year earlier than scheduled.
See the below graph for a comparison of the current schedule, the House proposal, and the new Senate bill. A table representation is below as well, providing the exact rates proposed.
Bill sponsor Senator Paul Newton (R-Cabarrus) said, “Our tax policy has proven successful … We believe this tax package will return a significant amount of money to taxpayers while still maintaining the needed revenue to run the state smoothly.”