North Carolina property taxes are in the news this spring. Republican state lawmakers are advancing a proposed constitutional amendment that would direct the legislature to limit local property tax increases. Though it has yet to be debated or voted upon by either the House or Senate, the proposed amendment — which is contained in House Bill 1089 — was reportedly part of a recent budget agreement. If approved by both houses, the amendment would appear on the state ballot this fall.
That the proposal deals with a topic of importance and widespread concern is beyond debate. Property taxes are the single largest source of revenue for local governments in our state. Without them, dozens of core public services upon which all North Carolinians rely would wither and fail.
That said, recent economic trends and pressures — most notably, rapid changes in the housing market and the growing pressures on local governments to pick up the slack caused by state funding cuts — have served to drive property tax hikes in several counties. Lawmakers of both major parties are hearing pleas for relief from their constituents.
Unfortunately, as has so often been the case over the last decade and a half when it comes to state tax policy, the proposed constitutional amendment will do little, if anything, to address what ails the system and could, quite likely make things worse. The following truths about North Carolina property taxes help explain why.
Much of the current situation is the legislature’s own doing. Try as some legislators might to blame the widespread rise in property tax bills on local elected officials, they would do much better to gaze in the mirror. As noted above, repeated and regressive state level tax cuts in recent years — most notably to corporate and personal income taxes — have pressured local officials to find new sources of revenue to fund services like public schools. Federal funding cuts have made things even tougher. One of the best and simplest things the General Assembly could do to ease the pressure on local property taxes is to reverse the regressive income tax cuts they’ve enacted in recent years — most of which have provided only a few dollars of relief to average households — and use the proceeds to dramatically improve state funding for public education. Inequity is a significant problem in the current property tax system. One of the biggest problems that has afflicted property tax systems across the nation for decades is the way things like rising home prices and infrequent and inconsistent valuations have adversely impacted many households — particularly those headed by people of color, people with low incomes and seniors on fixed incomes. Recent research conducted by the Wake County Property Tax Justice Working Group has identified numerous examples in which Black homeowners in the Triangle are over-assessed for property taxes, despite being frequently under-assessed when it comes to mortgage loans. In general, wealthy property owners — who tend to appeal their assessments much more frequently — fare much better on their property tax bills. Simplistic property tax caps have not worked well. The idea advancing at the General Assembly is not a new one. Many states – most infamously California with its ill-fated Proposition 13 of the 1970’s – have imposed statewide property tax caps of various forms. Unfortunately, the typical effects of such caps have been a) more inequality based upon when people purchase their homes, b) reduced local revenues for schools and other core services, and c) more reliance by local government on regressive user fees. The proposed amendment is deceptive and unnecessary. Interestingly, though it’s being pitched and widely discussed as a new cap on property taxes, the proposed legislation would not make any such change. Weirdly, it only directs the legislature to enact some kind of undefined cap at some later date — something it already enjoys full constitutional authority to do. It’s enough to make one think that, as was the case with several recent constitutional amendments placed on the ballot by GOP lawmakers — e.g., the absurd “right to hunt and fish” amendment from a few years back — the cynical plan here is much more about driving conservative voter turnout than effecting meaningful policy change. Much better solutions exist. Happily, much fairer and more effective ways exist to address the problems afflicting North Carolina property taxes. As experts at the North Carolina Budget and Tax Center recently documented, lawmakers would do much better to: a) expand current tax exemptions for older and lower-income homeowners by dropping the age of eligibility and raising income limits, and b) enact a comprehensive property tax “circuit breaker” system as has been done in some other states. Requiring more frequent home assessments would also limit the shock that can occur when they take place years apart.Will Republican leaders persist with their “to seem rather than to be” amendment? Given their tax track record of recent years, it seems likely. One can only hope that voters will awaken to the scheme and demand genuine property tax reform when they go to the polls this fall and in future elections.
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