This week, the House Select Committee on Property Tax Reduction and Reform concluded its work, advancing two proposals for consideration by the full House. If enacted, these measures could significantly shift the balance between state and local authority and create new pressures for local governments responsible for funding essential public services, including public education.
House Committee Key Proposals
Out of the four proposals, the committee approved two that are likely to be considered during the short session:
- Constitutional Amendment on Property Tax Levy Limits: This proposal would require the General Assembly to establish limits on local property tax rate increases. As a constitutional amendment, it would need approval from both chambers (by two-thirds vote) before going to voters in November’s election. While details would be determined in statute, proposed limits may be tied to inflation and population growth, with local voters able to approve exceptions, according to the Speaker of the House, Destin Hall.
- Affordable Housing Exemption Modifications: This proposal would address the so-called “Blue Ridge Housing loophole” by revising property tax exemptions for certain apartment developments. Some counties have already reported significant revenue losses due to increased use of these exemptions since 2021.
Implications for State and Local Funding
These proposals come amid broader fiscal trends that are already constraining public investment. According to the NC Budget & Tax Center, recent corporate and personal income tax cuts are projected to reduce state revenues by billions annually in the coming years. At the same time, their polling suggests many North Carolinians report little direct personal benefit from these tax changes, raising questions about their overall impact.
As state revenues tighten, the role of local funding becomes even more critical. Property taxes remain a primary revenue source for counties, funding at least half of local budgets for most of the state. Limiting property tax growth would further constrain local governments’ ability to respond to community needs. County commissioners have raised concerns about reduced local flexibility and a shift in decision-making authority to the state.
For public schools, the implications are significant. Because school districts rely on county appropriations for key expenses, including capital needs, reduced local revenue capacity could translate into tighter school budgets–as evidenced by several districts already trimming budgets for the upcoming school year. This is especially consequential given the continued absence of a state budget and the state’s primary role in funding education. In recent years, counties have taken on a larger share of school-related costs–from salary supplements to classroom resources–highlighting the interconnected nature of state and local funding decisions.
Efforts to limit tax growth may address specific concerns, but they also raise questions about long-term revenue stability, local decision-making authority, and the capacity to sustain investment in public goods like education.
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