Property taxes power local services across North Carolina

By Alexandra Forter Sirota + Jennifer Nguyen 

Working families and seniors in North Carolina are struggling to make ends meet and need relief. But proposals to eliminate or cap property taxes are misleading solutions that will not make housing costs more affordable.

Everyday North Carolinians have already seen how the promise that income tax cuts would make life easier failed to deliver relief for most families. Most benefits have gone to the wealthy and profitable corporations, while costs are increasing for the rest of us through higher fees and reduced services. Even so, Senate leaders continue their relentless drive to push down tax rates, while the House leadership has proposed protecting revenue needed to fund state priorities by keeping income tax rates at current levels for now.

There is a need for responsible property tax reform that makes life more affordable. But proposals to limit property tax levels or growth would do the opposite: shifting costs onto working families and seniors while giving handouts to ultra-wealthy property owners and threatening the local public services our communities rely on.

Many Counties Depend Heavily On Property Taxes To Meet Community Needs

Property taxes are a major source of local revenue. They fund about 44 percent of county general fund budgets and 22 percent of municipal budgets statewide. But reliance on property taxes varies across North Carolina, as shown in the map below.

For 57 counties, property taxes make up at least half of the county general fund budget, with that share reaching as high as 75 percent for some. Limiting local governments’ ability to raise property taxes would thus put a large share of county budgets at risk. The impact would be particularly severe for rural counties, 39 of which rely on property taxes for more than half of their general fund revenue. Because rural areas tend to experience slower population and development growth, they are often hit hardest by broad limits on property taxes.

In recent years, rising real estate values have increased property tax collection. As North Carolina’s population grows faster than the housing supply, limited housing availability has driven up rents and the cost of home ownership in many areas. At the same time, wages and income have not kept pace with rising costs, meaning higher property tax bills can add to the affordability challenges many families already face.

Property tax revenue is a predictable stream of revenue, grows at a steady pace, and can be used to fund broad purposes, making it a stabilizing force in local budgets. They help local leaders meet community priorities: public safety, parks and recreation, education, and social services. As costs rise and state and federal support declines, local governments are increasingly being asked to shoulder a greater share of the costs or take them on altogether.

Federal And State Cuts To Services — Made To Fund Income Tax Cuts — Have Shifted Costs To Local Governments

If state income tax cuts have not made people’s lives better over the past decade, new promises that property tax cuts will do the same should raise alarms. As the state and federal governments have cut services to fund those income tax cuts, the costs of maintaining essential services have been pushed onto local governments with few options to respond.

The Clearest Example Of This Cost Shift Is In Public Education

The state’s persistent underinvestment in public schools has weakened every child’s access to education and increased pressures on local governments to fill the gaps. As the state has failed to step up, counties have been forced to take on a larger share of costs for teacher and personnel pay and growing student needs.

Since counties have different levels of property wealth to draw from, this growing reliance on local funding can widen differences in school resources. Research from the NC Public School Forum shows that growing reliance on local funding is widening the gap in educational opportunities between counties with high and low property wealth.

It should then be no surprise that many school districts are facing serious budget challenges this spring. In the past few weeks, districts have begun making difficult decisions to address their budget shortfalls:

• Wake County is considering higher school meal prices, Pitt County is proposing position reductions, and Haywood County Schools are requesting additional county funding to close budget gaps.
• Durham is considering closing or consolidating schools, while Randolph and Cumberlandcounties have already moved to close schools for budget savings.

State Policy Action — And Inaction — In Other Areas Is Also Increasing Local Costs

Beyond public education, state policy decisions and the lack of additional funding to implement them are driving up costs for local governments.

• Election administration: The General Assembly has shortened deadlines for absentee ballots and ballot curing, forcing counties to increase staffing and training without additional state funding.
• Public safety: New state public safety laws, including Iryna’s Law, require additional enforcement responsibilities without providing funding for the personnel needed to carry them out.
• State Health Plan premiums: The state raised monthly premiums for public employees covered by the State Health Plan, raising costs for the 19 counties participating in the plan. As the state withdraws support in other budget areas, these rising personnel costs add onto already strained local budgets.
• Hurricane Helene recovery: Western NC counties are still covering cleanup costs while waiting for federal reimbursements. With limited state funding to support them in the meantime, some counties have had to dip into their reserves to pay for these expenses.

Federal Policy Changes Are Shifting New Responsibilities And Costs To The State And Counties

Health care and food assistance programs support the well-being of millions of North Carolinians and help families get ahead. But H.R. 1, the harmful federal megabill passed in 2025, makes cuts to these programs while shifting new responsibilities and costs onto the state and counties administering these programs. If the state does not support counties in carrying out these changes, access to benefits for millions of recipients could be put at risk.

Some of these new costs and responsibilities include:

• SNAP administrative cost shift: H.R. 1 increases the administrative cost match required from counties, with North Carolina counties expected to face about $69 million in new administrative costs annually.
• New complex administrative requirements: H.R.1 makes Medicaid and SNAP more complex to administer, requiring counties to increase staff capacity to meet new eligibility verification, reporting, and compliance rules.

Nowhere Left To Go To Fund People’s Priorities

A property tax limit does not make the need for funding disappear. It would simply force local governments to do more with less at a time when the state is already reducing its own revenue capacity. Because local governments have limited authority to raise other revenue, state-imposed limits on property taxes would result in less funding for the services that keep communities running: public schools, public safety, roads, libraries, and disaster preparedness.

As lawmakers return to Raleigh to decide on the delayed state budget, they must recognize capping property taxes on top of already strained local budgets would strip communities of one of the few remaining ways to fund their priorities. Better policies are available to protect those hit hardest by rising property taxes while ensuring communities can deliver the services needed to make lives better across the state.