The solar tax break NC should reconsider

With the spring primary elections behind them, North Carolina lawmakers will return to Raleigh for the legislative “short” session, facing a growing national and local focus on property taxes. States such as Montana and North Dakota enacted significant reforms in 2025; while others, including Michigan, Tennessee, and Florida, are advancing proposals or preparing to put them before voters in 2026.

In North Carolina, the issue has moved to the forefront for a simple reason: The numbers are becoming hard to ignore.

Over the past decade, property tax collections in North Carolina’s largest counties have grown far faster than inflation and population. According to recent research from the John Locke Foundation, collections exceeded that benchmark by more than $2.6 billion. In some counties, the gap is striking. Wake County alone collected roughly $1.6 billion more than it would have under a growth limit tied to inflation and population.

For homeowners and businesses, those numbers translate into unpredictability. Property tax bills can rise sharply even when tax rates stay the same, driven by revaluations and rising assessments. That volatility is one reason lawmakers in both the House and Senate have begun seriously examining reforms.

That concern is widely shared. A recent Carolina Journal poll found that more than three-quarters of North Carolina voters (76.8%) say their property taxes are a burden on their household budget.

Two ideas have emerged at the center of that debate.

The first is limiting the rate at which property tax revenues can grow. The House Select Committee on Property Tax Reduction and Reform has advanced a proposal to require such limits. In simple terms, a levy limit would keep revenues from growing faster than inflation and population, preventing the rapid expansions seen in recent years. It would not require cuts to existing budgets, but it would introduce greater predictability for taxpayers.

The second is simplifying the property tax code by revisiting exemptions and carve-outs. Lawmakers have already begun exploring changes to exemptions for nonprofit hospitals and affordable housing, indicating a broader willingness to ask a basic question: Which property should be taxed, and which should not?

These two lines of reform, limiting growth and reexamining carveouts, are often discussed separately. But they are, in fact, closely connected.

A sound property tax system should be both predictable in how fast it grows and neutral in how its burden is distributed. Focusing on only one of those goals risks undermining both. If lawmakers limit revenue growth but continue to narrow the tax base through exemptions, the result is a system that shifts more of the burden onto those who remain fully taxable, particularly homeowners and small businesses.

That is why the current reform effort, while promising, is not yet complete.

One of the most consequential examples of this imbalance appears in energy policy. Under current state law, 80% of the appraised value of a solar energy electric system is excluded from property taxation. Whatever its original rationale, this is a substantial carveout. It removes a significant category of property from the tax base and shifts the responsibility for funding local services onto other taxpayers.

This is not an argument against solar energy or investment in new technologies. North Carolina has benefited from being an attractive place for economic development and maintaining a stable business climate. Supporters argue the exemption has helped drive investment in solar energy, a goal some policymakers share. But current law singles out one industry for preferential treatment: Only solar energy systems receive a substantial property tax abatement, while other forms of energy production do not. A sound tax system should strive for neutrality, not selective advantage.

Predictability and neutrality should go hand in hand.

If lawmakers are serious about broadening the tax base and creating a more balanced system, the solar exemption deserves a closer look. The goal should not be to change the rules overnight, but to move deliberately toward a system in which similar types of property are treated more equally.

A phased approach would accomplish that.

For example, the current 80% exclusion could be reduced by 20 percentage points each year over four years, until it is fully eliminated by 2030. This kind of glide path would provide businesses with the certainty they need to plan and invest while gradually restoring a broader, more neutral tax base. It reflects the same principle behind levy limits — a predictable, rules-based policy that avoids sudden disruptions.

Just as importantly, it would align with the broader direction lawmakers are already pursuing. If the General Assembly is willing to reconsider longstanding exemptions in other areas, it should also be willing to examine newer ones that have significant fiscal effects.

Property tax reform is not a single policy change. It is a framework.

Limiting the growth of property tax revenues can help protect taxpayers from sudden increases. Simplifying the tax code and reducing carveouts can ensure that the burden of funding local government is shared more evenly. Together, these reforms can produce a system that is more stable, more transparent, and fairer.

North Carolina has an opportunity in the 2026 legislative session to take meaningful steps in that direction. The work already underway is an important start. Completing it will require lawmakers to look not only at how much is collected, but also at who is asked to pay.

That final step would bring the state closer to a system that is both predictable in its growth and neutral in its design.