In the North Carolina House’s recently released budget plan, there are two starkly different stories unfolding — one of responsible reform and one of political retreat. On the one hand, legislators are wisely embracing the principle of good government by eliminating nearly 3,000 long-vacant state positions. On the other, they’re dangerously reversing course on one of the state’s most successful economic strategies: income tax reduction.
While the right hand is trimming waste and rewarding productivity, the left hand is fumbling a proven playbook on economic growth. North Carolinians deserve both efficient government and a tax code that supports investment, job creation, and long-term prosperity.
THE GOOD: CUTTING WASTE, FUNDING RAISES, RESPECTING TAXPAYERS
The House budget wisely directs state agencies to eliminate thousands of government positions that have remained unfilled for over a year — some much longer. These positions have served as budgetary placeholders and bureaucratic comfort zones, siphoning taxpayer dollars away from meaningful service.
These cuts are not theoretical. In the House budget, lawmakers direct agencies to close the vacant jobs and use the savings on raises for those state employees who are delivering core services for North Carolina taxpayers. This translates to the removal of 98 unfilled health care-related roles in DHHS, four high-level education program director positions at the Department of Public Instruction, and additional vacant positions across Agriculture, Insurance, Commerce, and other executive branch agencies.
It does direct the removal of more than 400 correctional officer vacancies, which the Department of Public Safety has repeatedly said remain unfilled because of a dangerous labor shortage among those willing to serve in North Carolina’s prisons. While the House gives corrections officers the state employees’ 2.5% raise, the Senate budget offers a nearly 9% raise in an effort to make those jobs more attractive. Both the House and Senate budgets allocate $1.1 billion in FY 2026 to replenish the state’s rainy day savings fund following expenses from Hurricane Helene.
In redirecting this unused funding, the House budget frees up enough for an average 8.7% raise for teachers over the next two years and restoration of “master’s pay” for teachers who received advanced degrees. In addition, all state employees get a 2.5% pay raise and cost-of-living bonuses for state retirees. The House budget also redirects $500 million taxpayer dollars from the non-profit NCInnovation to recovery efforts for Hurricane Helene victims.
This is what good government looks like: Pay people who do the work, eliminate what isn’t necessary, and ensure taxpayer dollars are aligned with real service delivery.
THE BAD: RAISING THE BAR ON TAX CUTS
For more than a decade, North Carolina’s economic success story has been powered by smart, strategic tax reform. The personal income tax rate has steadily dropped — from over 7% a decade ago to a scheduled 2.49% by 2031 under current law, which would be the lowest tax rate in the Southeast. The state is also on track to phase out its corporate income tax entirely by 2030.
This approach, modeled on the idea that taxing work and investment less leads to greater economic growth, has attracted national acclaim and brought our state economic growth even during inflation, recession, and a pandemic. It helped make North Carolina the top-ranked state for business by Forbes, Site Selection, and U.S. News & World Report. Our neighbors are taking note. Recently South Carolina leaders set their sights on challenging our top state status, unveiling a plan to cut taxes by 40%, eventually dropping to 2.49%.
The race is on, but the House’s new budget would disrupt our momentum. The bill dramatically increases the revenue targets required to trigger planned income tax cuts by $3 billion this year and $7 billion in later years. This isn’t fiscal caution. The House is delaying or potentially canceling the promised tax relief.
Proponents of dramatically raising the trigger levels argue that that they are coming too fast and the current economic forecasts are waving a red flag. However, relying on such economic forecasts to make tax policy decisions is risky — because they’re often wrong.
North Carolina’s own revenue projections have a history of underestimating how strong the economy turns out to be. As the John Locke Foundation points out, these forecasts might be politically useful, but they’re not reliable enough to justify delaying tax cuts. Slamming the brakes on proven tax reforms because of revenue forecasts is like trusting a weather app that’s wrong half the time — and canceling your plans every time it shows clouds.
STAY THE COURSE
The House budget offers a study in contrasts. It demonstrates clarity and purpose in eliminating wasteful spending and vacancies, while focusing resources on teachers and other state employees who deliver core services — a reform that should earn praise from every corner. But it veers dangerously off course by halting the steady march toward lower, flatter, and fairer taxes.
For a decade, conservative tax reform has been a cornerstone of North Carolina’s competitiveness and prosperity. Reversing that now not only risks our economic trajectory — it jeopardizes the political credibility of those who ran on reducing taxes, not raising them.
Now is not the time to blink. It’s time to recommit to the formula that works: leaner government and lower taxes.
