NC: Motor fuels tax up, individual and corporate income tax rates down

By Alan Wooten | The Center Square

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(The Center Square) – Taxpayers in North Carolina have new levels in three areas impacting everyday life.

Arguably the most times transacted against least noticed will be at the gas pumps. Starting on New Year’s Day and running to Dec. 31, the motor fuels and alternative fuels excise tax rate is 41 cents per gallon or gallon equivalent, the state Department of Revenue says.

Individual and corporate income tax rates are also dropping with the turn of the calendar. For 2026, the individual income tax drops to 3.99% from 4.25%, and the corporate rate drops to 2.25% from 2.5%.

Legislation in place, barring changes, will eventually phase out the corporate rate by 2030. For individual income taxes, there’s a floor of 2.49% contingent on state revenue collections meeting trigger amounts.

In 2010, when Republicans took majorities in both chambers of the General Assembly for the first time in 140 years since Reconstruction, North Carolinians were on an individual income tax system with rates of 6%, 7% and 7.75%, with potential for a surtax on higher earners. The state had a corporate income tax rate of 6.9% at that time.

(NC State tax rates continued below local advertisers)

The rainy day fund, also known as the Savings Reserve in the General Fund, in 2010 was between $800 million and $1.2 billion. On June 30, even with the more than $1.1 billion allocated to Hurricane Helene recovery, the pot still held $3.62 billion.

The state's population has swelled from more than 9.5 million in the 2010 U.S. Census to more than 11 million in 2024. By July, it is expected to be at 11.07 million.

First-term Democratic Gov. Josh Stein, a critic of Republican policies and tax cuts, said last month the 2025 calendar year included commitments for more than 33,000 new jobs and $23.1 billion in new investments. Biotech, aerospace and manufacturing were the leading sectors.

The motor fuels tax, per state statute, can be calculated using the annual energy index percentage change in the consumer price index for all urban consumers from the Bureau of Labor and Statistics for October released in November, or the equivalent, says Director John Panza of the Excise Tax Division.

North Carolina’s 41 cents per gallon tax rate for 2026 is topped only by California (61.2), Pennsylvania (57.6), Washington (55.4), Michigan (52.4), New Jersey (49.1), Illinois (48.3) and Maryland (46).

Motor fuel taxes in the state fund the Department of Transportation’s highway and multi-modal projects, accounting for more than half of the state transportation resources. The revenues go into the Highway Fund and the Highway Trust Fund.

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Chuck Thompson is a reporter and columnist for The Shelby Independent.