State lawmakers are considering new restrictions on local governments' ability to increase property tax revenue — part of an effort, they say, to bring down homeowners' tax bills.
Republicans in the state House recently created a committee to look at property tax burdens they worry make home ownership less affordable. On Wednesday, the committee heard recommendations from the conservative-leaning Tax Foundation. The group suggests North Carolina use what's called a "levy limit" to restrict county and municipal governments.
That approach would automatically lower property tax rates when assessed values increase for existing homes and businesses. Additional increases in property tax revenue would require local leaders to get voter approval through a referendum.
"If a county can make the case that they absolutely need to spend extra money on a particular project, then they can take it to the voters, and the voters can say yes or no," said Abir Mandal, a senior policy analyst at the Tax Foundation. He pointed to other states like Washington and New York that already have similar policies. "We have actually seen slower per-capita tax growth in those states, and so we suggest that North Carolina could apply a similar model to its property taxes."
Democrats on the committee say they're concerned that idea could prevent local governments from raising money to build schools and other infrastructure. They say voters can elect new leaders if they're unhappy with taxes.
"Every two years we have elections, sure, but we're not taking the budget to the people," said Rep. Brian Turner, D-Buncombe. "So I think we need to look at our elected officials, that we've elected for the role that they are to fulfill, and not micromanage."
Many local governments in North Carolina already respond to higher assessed values by setting "revenue neutral" rates after a revaluation cycle, but not all have taken that approach.
"The data shows there's a wide divergence between counties with regards to the increase in property tax burdens," Mandal told lawmakers. He pointed to Johnston County, which has seen its property tax revenue grow by nearly 25% over a five-year period — Johnston has also seen significant housing growth as a Triangle bedroom community.
Rep. Brian Echevarria, R-Cabarrus, likes the levy limit idea and says other states have shown "enough proof that the sky is not going to fall."
"Elections haven't worked, because people's property taxes are going crazy," Echevarria said.
Rep. Jeff Zenger, R-Forysth, argued that local elected officials have "insulated themselves" from voters by holding off-year elections and staggering their terms, so that only a portion of the town council or county commission is on the ballot at a time. He says state and local building regulations are also driving up housing costs, which lead to higher property valuations and tax bills.
"When do we get to a point where we start to say, 'you know what, we don't need all that government is throwing on us, whether it's in regulation or even services?'" Zenger said.
Rep. Julia Howard, R-Davie and a co-chair of the committee looking at property taxes, urged her colleagues to submit their feedback to help develop legislative recommendations for this spring's short session.
"This is a start, and I can't tell you what, if anything, the other side of the pod is going to do," Howard said, referring to the Senate. Senate leader Phil Berger recently named a group of Republican senators to review similar concerns about property taxes, but it has not held any public meetings.
The committee also heard a presentation Wednesday about increasing costs, such as food stamp and Medicaid program administration, that local governments are facing as a result of changes at the federal level.
"We've got to be careful that we don't tell the people who are elected how to run their cities and the counties, because I'm sure all of us don't like all the cuts that are coming from the feds that we just heard," said Rep. Larry Potts, R-Davidson.
