RALEIGH — Homeowners dealing with double-digit property tax increases were in the minds of lawmakers last Wednesday when the House Select Committee on Property Tax Reduction and Reform debated a proposed constitutional amendment that would allow the General Assembly to enact a ”levy limit” on local governments.
A levy is the total dollar amount of property tax revenue a city or county has the authority to raise. A levy limit would cap how much that total can grow year over year, rather than just capping a rate or individual assessment.
The draft amendment does not spell out exact numbers. Instead, lawmakers would need to pass legislation limiting how much total property tax revenue municipalities and counties can raise each year.
If the proposed constitutional amendment is approved by legislators, it would not be subject to a gubernatorial veto, and voters in the state could see it on their ballots in November.
The committee’s discussions were lengthy, often crossing over into formula and cap conversations while debating the amendment. At one point in the meeting, committee members heard about seniors on fixed incomes facing 52% to 146% effective rate jumps after property revaluations.
“I wonder if the cap ought to be the amount that it can be increased any year. In other words, I’ve got a letter right here in front of me from a 72-year-old woman who’s on a fixed income, who since 2021, her taxes, her property tax has gone up 146%,” said Rep. Jeff Zenger (R-Forsyth), waving a constituent letter. “It’s insane. She’s lived in the house for decades. It’s going to cost her $790 a month to stay in the house that she paid for. It’s paid for.”
Others warned that without limits, municipalities would simply keep raising taxes rather than cut spending.
Critics, like Rep. Maria Cervania (D-Wake) said she had “deep concerns” that a cap could impact counties differently and negatively.
“And if we set a number, it may not work for you, may work for us, it may not work for me and Wake, it may not work for Catawba,” said Cervania, adding that a uniform number might require a look at the state’s uniformity clause “because right now we’re not the same state as we were in 1973 or whenever this was created.”
“If we put levy limits — I just want to say this real quickly — you all deciding this, our voters with deciding this, will defund the police,” she said. “Municipalities have 55% of their budgets in public safety, particularly law enforcement.”
Legislative Fiscal Research staff clarified that a levy limit would not touch current budgets or mandated services like police and schools, and it would only constrain future growth. Localities could still spend what they already collect; they just couldn’t grow the pot as fast as property values rise.
Rep. John Blust (R-Guilford) was skeptical the vague language might confuse the public.
“I think the voters won’t understand what’s proposed,” Blust said. “I think they would understand a clear cap. I think the income tax is constitutionally capped at 7%, meaning no future General Assembly can come in and raise it to 8%. We’re bound by the Constitution.”
Supporters called the levy limit proposal a “first step” that would give voters predictability.
Committee Co-Chair Rep. Julia Howard (R-Davie) called the process “very complicated.”
“This is the beginning, not the end,” said Howard. “I have already spoken to the speaker to say we need to extend this committee for the next year.”
The eventual meeting consensus was that cap details needed to be hammered out before implementation of a statute, should voters approve the amendment.
A vote on the draft was signaled for the committee’s April 15 meeting.
House Speaker Destin Hall (R-Granite Falls) formed the Select Committee last December. The Senate has created a similar committee, and Senate Leader Phil Berger (R-Eden) has said he will propose a property tax evaluation moratorium bill during the short session.
“Property taxes are out of control,” Hall said in a press release following the committee’s meeting. “Families are getting ripped off as some, but by no means all, local governments rake in billions more than inflation and population growth warrant. It’s time for real reform, which is why the House is pursuing solutions like levy limits to stop runaway property tax hikes and protect North Carolina taxpayers.”
Hall’s release also referenced an analysis from the John Locke Foundation, stating it shows that over the past decade, “9 of North Carolina’s 10 most populous counties have overtaxed property owners by nearly $3 billion beyond what inflation and population growth justify.”
“A ‘levy limit’ would prevent local governments from increasing total property tax beyond a certain threshold, likely tied to inflation and population growth,” Hall’s release stated. “States that impose levy limits generally allow larger increases only in certain circumstances, such as with voter approval via referenda.”
Dozens of states already use similar levy models.
Massachusetts’ Proposition 2½ (1980) caps the total levy increase at 2.5% per year plus revenue from new construction. Communities could override the limit with a local vote, but the proposition’s formula has kept overall growth at a modest rate so far.
New York’s more recent “tax cap” uses a formula of the lesser of 2% or the rate of inflation, plus various exclusions, and in some cases can require supermajority votes to exceed the cap limit.
Other tax-related measures taken up by the committee included a draft bill closing a loophole on affordable housing exemptions, tightening up what entities can qualify for an exemption meant for nonprofits. Hospital tax refunds and related nonprofit hospital tax refund modifications were also included on the agenda, as well as impact fees.
