Governor Kim Reynolds of Iowa signed legislation on May 1 to further reduce the state’s flat income tax, lowering it from 5.7% to 3.8% by the end of 2024. In addition, Iowa lawmakers passed a constitutional amendment requiring a two-thirds super-majority vote to raise taxes, as well as another amendment preventing the reimplementation of a progressive income tax. These amendments must be approved by the House and Senate in 2025 before being placed on the 2026 ballot for voter approval. Similar taxpayer protection measures will also be on the ballot in Washington State and California this November.
In California, a proposed constitutional amendment would subject tax increases referred to the ballot by local officials to a super-majority vote requirement and require all tax hikes passed by the state legislature to also be approved by voters. Meanwhile, in Washington State, voters will have the opportunity to repeal the state’s capital gains tax and cap-and-trade program, as well as vote on a constitutional amendment prohibiting the taxation of income. Constitutional income tax prohibitions have been approved in Tennessee and Texas in recent years to protect taxpayers.
In North Carolina, a constitutional amendment approved by voters in 2018 capped the state’s personal income tax rate at 7.0%. Despite the state’s current flat income tax rate of 4.5% and scheduled reduction to as low as 2.49%, the 7.0% income tax cap would still allow for significant tax hikes. Lawmakers are considering referring a new amendment to the November ballot to lower the income tax cap to 4.5% and provide more protection for taxpayers. Democrats initially opposed the 2018 measure to reduce the income tax cap, but it passed with over 57% of voter approval.
Senator Berger and his colleagues had initially proposed lowering the income tax cap further to 5.5%, but the amendment ultimately settled on 7% due to opposition in the House. Supporters of the 2018 measure saw it as a step towards protecting taxpayers from potential income tax hikes in the future, despite some criticism from Democrats at the time. If a new amendment to reduce the income tax cap to 4.5% is placed on the November ballot in North Carolina, voters will have the opportunity to strengthen taxpayer protections and potentially prevent large tax increases in the future.
