The friction between limiting local property taxes and the increasing expenses counties will face as the cost of services are passed down from the federal government illustrates the squeeze local officials could face as they try to balance future budgets.
Property taxes are a major source of revenue for cities and counties, helping to pay for schools, public safety, and other services. Property taxes had been considered local issues, with the legislature having minimal involvement. Now the state House Select Committee on Property Tax Reduction and Reform is considering ways to limit property tax increases, or even cut local taxes, as their constituents sweat over higher bills.
Wake County details on its website how collected property taxes are spent. A state House committee is considering ways to limit property tax increases. (Photo: Clayton Henkel/NC Newsline)Speaking to the committee Wednesday, Abir Mandal, senior policy analyst with the Tax Foundation, proposed a cap on how much revenue local governments can collect from existing properties each year, called a levy limit, with new construction exempted. If a local government needed more revenue, elected officials could put the question to voters through a referendum, he said.
The Tax Foundation is a conservative-leaning organization that promotes tax reductions. It ranks states based on their tax systems.
Levy limits “constrain the total tax burden,” Mandal told the committee, and they don’t discriminate between residential and commercial property. Other states, including Washington and New York, have levy limits, he said.
The committee also heard an overview of some of the new expenses counties will shoulder beginning this year.
Whitney Afonso, a professor at the UNC School of Government, focused on administrative costs the state and local governments will bear for Medicaid and the federal nutrition program known as SNAP.
Beginning in October, the federal government will cut its share of the administrative costs for SNAP from 50% to 25%. Collectively, counties are facing an annual increased cost of $67 million to $70 million a year.
Counties will also be responsible for making sure certain SNAP beneficiaries and people with health coverage through Medicaid expansion meet work requirements.
The state Department of Health and Human Services has estimated counties will need $31.2 million a year to support increased responsibilities for monitoring Medicaid expansion beneficiaries’ compliance with work requirements and more frequent checks of their eligibility.
Rep. Brian Turner (D-Buncombe) said a levy limit would force inflexibility or non-responsiveness on local governments and he advised against micromanaging local elected officials.
Those who run afoul of constituents can be voted out of office, Turner said.
Rep. Jeff Zenger (R-Forsyth) said residents are being squeezed by local tax bills.
“It needs to be harder to spend their money,” he said.
Kevin Leonard, executive director of the NC Association of County Commissioners, said the commissioners are nervous because they’re facing so many unknowns.
About 70% to 75% of property taxes go to mandated services, Leonard told Newsline. Capping or limiting property taxes “is really going to impact how counties deliver those state-mandated services,” he said.
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