Should the NC constitution limit property taxes? Some lawmakers say yes

Republican lawmakers in the North Carolina House of Representatives rolled out a proposed constitutional amendment seeking to lower people’s property tax bills Wednesday.

The proposal would ask voters to limit the ability of cities and counties around North Carolina to raise property taxes. It’s based on rules called levy limits that are used in a handful of other places in the country. WRAL reported last month that Republican lawmakers in North Carolina were beginning to look into levy limits.

Critics of the proposal to limit property taxes accuse the state legislature of overstepping its bounds, trying to micromanage local governments and threatening a main funding source for schools, police, public parks and more.

Supporters say they're trying to put more money back in people's pockets.

"Property taxes are out of control," House Speaker Destin Hall said in a news release. "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."

Rep. Erin Pare, R-Wake, said the main idea is to keep property taxes at a reliable rate, to prevent sudden spikes in people's bills.  "Put some reasonable guardrails on the how much their property taxes are increasing in a period of time," she said. "The rapid increases and the spikes in property tax bills has created a lot of concern. And we need to be responsible in what we're asking of people who are on tight budgets, or seniors on a fixed income."

Wake County Democratic Rep. Maria Cervania, however, countered that Republicans supporting this effort would "will defund the police." She said that, on average, more than half of the typical municipal budget is spent on police, firefighters and other public safety measures.

Cervania questioned whether the state government would step in and help fill any budget holes caused if this amendment passes.

"We haven’t talked about our responsibility, if that shift comes to play, if the state ever compensates for that shift in money that has to be paid," she said.

Some Republican lawmakers, however, said they were less concerned with the ability of cities and counties to pay the bills, and more concerned with the ability of senior citizens to pay their bills. Rep. Jeff Zenger, R-Forsyth, said he recently spoke with a woman in her 70s whose property tax bill more than doubled in the past five years.

"Our governments don't want to cut their spending," Zenger said. "But guess what? This lady will have to. Does she go to Meals on Wheels? Stop taking medicine? She’s on fixed income."

Rep. John Blust, R-Guilford, said people who bought homes decades ago and have seen those homes increase dramatically in value shouldn't have to keep paying more in taxes as their homes increase in value. "So many of these people are sitting in a home they bought 30, 40, 50 years ago, at some small amount," he said. "And so mostly, they’re being taxed on property tax for an unrealized capital gain. That’s bad tax policy."

The state legislature has historically had no say in property taxes, since they are set by local governments and exclusively used to fund local needs. But Republican leaders in North Carolina have spent years lowering the income tax rate and are now searching for other taxes to target.

Republicans risk losing supermajorities in the state legislature this fall, and constitutional amendment proposals require supermajority levels of support in the state legislature to be put on the ballot for voters to decide on. So it’s possible that during the short session scheduled for this spring, GOP leaders might push multiple constitutional amendments before potentially losing some of their power once new lawmakers are sworn in next year.

Wednesday's hearing focused on several potential reforms to property tax law in North Carolina, not just the constitutional amendment.

Lawmakers are also looking at ways to find new revenue streams, since their proposed constitutional amendment could cut off substantial amounts of funding for local governments.

One proposed bill announced Wednesday would limit property tax exemptions for affordable housing projects. WRAL reported last week that Wake County alone is losing out on $745 million annually in property tax revenue due to such exemptions — much of which is based on a new, broadly interpreted court ruling.

Two other bills take aim at tax loopholes enjoyed by hospitals. One proposes that hospitals incorporated as nonprofits, which most are, should pay more in property taxes. They currently enjoy broad exemptions. Another bill would lower the amount of sales tax refunds that nonprofits hospitals can claim annually, from $31.7 million to $10 million.