Vote NO on limiting property taxes

Last week, we discussed the impact of the proposed constitutional amendment to lower North Carolina’s income tax rate.

This week, we turn our attention to the second proposed amendment on the November 3 ballot. The ballot will ask voters to vote on a “constitutional amendment requiring limits on property tax increases by local governments.”

What exactly does that mean? The League of Women Voters translates the statement into plain English: “This amendment would require state lawmakers to pass a law setting limits on how much local governments can increase total property tax revenue they collect. The amendment itself does not set the limit.”

Why should NC voters care about this? Well to start, property taxes fund many essential county services across the state. In fact, property tax revenues are the primary funding supports for many of our state’s schools, law enforcement, emergency services, health and human services, parks and recreation, libraries and elections.

Much of our state’s revenue comes from property taxes. They fund about 44% of county general fund budgets and 22% of municipal budgets statewide. 

But reliance on property taxes varies across North Carolina. For instance, in 57 of North Carolina’s 100 counties, property taxes make up at least 50% of the county general fund budget. In some counties, that amount is as high as 75%.

The key takeaway? North Carolina’s counties rely on property taxes to very different degrees, and the amount of revenue generated by a single penny on the tax rate varies dramatically depending on the size and wealth of the local tax base. That means a statewide property-tax levy limit could have very different consequences for public schools from one county to another.

Let’s take a look at three NC counties: Anson, Guilford and Wake. 

In Anson County, property taxes account for roughly half of General Fund revenue, but the county’s relatively small tax base means one penny on the property-tax rate generates only about $185,000. Education receives about $6.25 million, or roughly 19.5% of the General Fund. The county’s high tax rate reflects its limited tax base rather than an ability to generate large amounts of revenue.

In Guilford County, property taxes generate about $542 million, representing roughly 64% of the General Fund. The county initially proposed a $19 million increase for its schools, but that was reduced to $5.6 million after state action affected county revenues. Guilford subsequently increased its property-tax rate by about 8%, while school operating funding increased only about 2%. The school system also faced an estimated $13.2 million additional cost from recent state mandates. Just one example of how state decisions can increase local financial pressure.

Wake County presents a very different picture. Its much larger tax base produces about $1.6 billion in property-tax revenue, or roughly 75% of the county’s General Fund. Wake raised its tax rate by two cents and provided schools with an additional $25.3 million, about a 3.4% increase over the previous year’s allocation. Yet even Wake faces significant revenue pressures, including roughly $35 million attributed to property-tax appeals and other changes to the tax base.

The contrast is important: a percentage-based tax levy limit does not translate into the same amount of money across counties. Wake can generate tens of millions of dollars from a penny increase on its tax rate, while Anson generates only a fraction of that amount. A cap could therefore constrain a county with a relatively small tax base much more severely when measured against its ability to fund schools and other services.

While a statewide property-tax limit may look uniform on paper, its impact is anything but. The same percentage cap could leave counties with dramatically different amounts of revenue to support public schools—and counties with smaller tax bases may have the least room to absorb the constraint.