North Carolina tax cap measure draws legal challenge

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Two North Carolina nonprofit organizations and the governor plan separate legal challenges of proposed constitutional amendments on the November ballot, including one asking voters to cap the state income tax rate.

Clean Air Carolina and the North Carolina NAACP filed a lawsuit Monday in the Wake County General Court Of Justice, Superior Court Division, contesting four of six amendments the Republican-led Legislature placed on the ballot.

One amendment the groups want stripped from the ballot would “limit future, legitimately-elected legislatures’ power to set state income tax rates higher than 7%, which could limit funding for programs in support of those living in poverty, civil rights, and environmental protection programs,” the groups, represented by the Southern Environmental Law Center, said.

Part of their legal argument that supports stripping four amendments from the ballot is based on the fact that the amendments were proposed by lawmakers who represent districts that the United States Supreme Court ruled illegal because of racial gerrymandering, the lawsuit said.

Capping the state income tax could present “unnecessary budgetary challenges should the state experience significant fiscal stress in the future," S&P Global Ratings said in a July 9 report.

North Carolina’s allowable maximum income tax rate is currently 10%.

S&P analyst Timothy Little said the proposed constitutional amendment comes several years after the state began reducing its income tax rates and expanding its tax base. The state moved to a flat tax rate of 5.8% in 2014. On Jan. 1, 2019, the state budget lowers the personal income tax rate to 5.25% from 5.499%.

“Given the current distance of the personal income tax rate from the proposed maximum allowable rate, we do not expect voter approval of the [tax rate] reduction to have a rating impact,” Little said. “For fiscal 2017, individual income taxes were the state's largest general fund revenue source, 52.9%, followed by sales and use taxes, 31%.”

SELC is also contesting legislative constitutional amendments that would “alter the separation of powers clause of the constitution” by shifting the governor’s right to appoint executive boards and commissions to the legislature.

Other measures the groups want taken off the ballot would shift the power to fill judicial vacancies from the governor to the legislature and would require people voting in person “to present as yet unspecified photographic identification before voting.”

Gov. Roy Cooper, a Democrat, filed a 47-page lawsuit Monday challenging two amendments approved by lawmakers that he said would "cripple separation of powers and checks and balances, the bedrock principles of our state constitution."

"The General Assembly has crafted ballot language that is designed to trick [voters] into voting for proposals by use of misleading and deceptive descriptions of the amendments," Cooper said. "The North Carolina Constitution prohibits the legislature from misleading voters about the effects of amendments to their constitution."

The governor challenged two amendments that would shift his power to appoint judges and to make certain state board appointments to the Legislature, including appointments to the Bipartisan State Board of Elections & Ethics Enforcement.

Cooper, who has battled the Republican-led Legislature over his gubernatorial powers since taking office Jan. 1, 2017, said the constitutional changes are tantamount to taking a “wrecking ball to the separation of powers.”

"These amendments will affect the everyday lives of all North Carolinians through appointment of regulators making decisions on education, pollution, and voting and the important decisions that judges make every single day," Cooper said Monday. "They were crafted in secret and designed to deceive, and they should not be put to voters."

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Lawsuits Tax rates State budgets Roy Cooper State of North Carolina North Carolina