NC lawmakers want to cap local property tax increases. Could the plan backfire?

A proposal in the North Carolina legislature to limit property taxes would hurt Wake County’s ability to fund schools, public safety, parks and other services, officials say.

Property taxes pay for 75% of Wake County’s budget and are one of the few revenue sources the county controls. Sales tax and fees for government services don’t generate anywhere near as much money and are less stable, Wake County commissioners say.

The Wake County Board of Commissioners voted unanimously to oppose limiting property tax increases in a resolution Monday.

What is the tax limitation?

The proposed legislation would put a constitutional amendment before voters in November.

The measure, called a levy limit, would effectively set a gross total amount that a local government could collect from taxpayers.

Lawmakers in a Republican-led House committee are recommending the measure to rein in large tax increases property owners have seen across the state.

In Wake County, many homeowners saw their tax bills go up after the county revalued properties in 2024. Property values increased by over 50% on average.

Since then, the county has decided to do revaluations every two years, which will mean that taxes won’t jump as much as they did in 2024 when properties were revalued for the first time since 2020.

Legislators also recommended ending certain property tax exemptions, which local officials welcomed. One of the largest allows a tax exemption for affordable housing.

Officials dubbed it the “Blue Ridge loophole,” after a housing project in Mitchell County was granted an exemption even though it was 99.9% owned by for-profit investors.

Local leaders in both Wake County and the city of Raleigh say their revenue for fiscal year 2027 is expected to be significantly lower than they had hoped. Both governments have indicated they may raise their property tax rates to help close the gap.

How would the limits affect local government?

State lawmakers haven’t set specific tax limits yet.

Without that, it’s difficult to gauge exactly how county services could be affected, County Commissioners Chair Don Mial said.

However, North Carolina requires its county governments to fund certain things like schools buildings, community college buildings and jails.

And with the county’s growing population, more funds are needed to expand infrastructure and fund long-term projects like new schools.

On average, 66 people move to Wake County every day, said Commissioner Safiyah Jackson.

“It means new students entering our classrooms, more families relying on EMS and public health services, increased demand for affordable housing, and continued pressure on our infrastructure,” Jackson said.

The state requires counties to pay for capital expenses, like new school buildings, while operational expenses — things like teacher salaries — are supposed to be paid for by the state, N.C. Association of County Commissioners director Kevin Leonard said.

But Wake County pays over $700 million for operating expenses at the school system — a third of the system’s operating budget.

“Public education funding is a shared responsibility,” Commissioner Cheryl Stallings said. It would help if the state did its part in funding operating expenses, she said.

Tax limits could also hurt county bond ratings, making Wake County pay higher interest when it borrows money, said Joy Hicks, policy and advocacy director at the N.C. Association of County Commissioners.

In addition, many incentives for business are partly funded or managed by local governments, Leonard said.

In Raleigh, City Council members are faced with a need to raise $13 million just to maintain their budget from last year. While closing the tax-exemption loophole will help, limiting taxes could impact the city’s, transit services, affordable-housing projects, parks and other services.

“Anything that impairs Raleigh’s ability to set our property tax rate restricts our ability to govern and provide services that [our] residents rely on,” Mayor Janet Cowell wrote in a statement to The News & Observer.

Will the tax limits pass?

Because they’re being proposed as a constitutional amendment, the tax limits would require supermajority support from the state House and Senate before they could be put before voters in November.

The proposal was put forward by Republicans, who hold majorities in both chambers of the state legislature.

Rep. Becky Carney, a Mecklenburg County Democrat, has said she supports advancing the constitutional amendment so the state can do something about property taxes while allowing the public to weigh in.

On the other hand, Maria Cervania, a Wake County Democrat, has questioned what limiting taxes would mean for local governments that need the money for services.

Removing a constitutional amendment would also require supermajority support and voters’ approval.

Leonard said it will be hard for lawmakers to vote no on the proposal.

“You want less taxes, and guess who’s going to vote for that?” he asked. “Well, everybody.”