CAROLINA FOWARD - Members of a special NC House Committee voted Wednesday to advance a new constitutional amendment that would, if passed, require the General Assembly to set limits on the property taxes levied by local governments. State law already limits local governments to a maximum property tax of $1.50 per $100 value. The only way for local governments to exceed that limit is with voter approval.
No local government has ever hit the current $1.50 per $100 ceiling.
Passing a constitutional amendment requires three-fifths of the members in the NC House and the NC Senate to approve an act submitting the proposal to a public referendum. If it passes the General Assembly and the public approves it, the proposed amendment would require the legislature to “enact limits on the amount by which the authorized property tax levy could be increased and allow for exceptions applicable to the limits enacted.”
This amendment does not propose a specific ceiling on property taxes to replace the current $1.50 per $100 limit. Nor does it propose a specific limit on how much property taxes could increase in a year.
During committee hearings, representatives referred repeatedly to stories of constituents who were facing unfair or unreasonable bills. At Carolina Forward, we believe in fairness and affordability. That applies to taxation, too.
Public revenue is supposed to create public value, and a wide range of critical programs across North Carolina depend on taxation for their existence. Some of those public goods depend entirely on state funds, others are funded by a mix of local and state funds. They include: Childcare, K-12 schools, Police, fire, and emergency medical services, Medicaid, Mental and behavioral health programs, The DMV, State parks, Roads, Libraries, Stormwater management, and Equal access to these and other public goods are essential to establishing a high quality of life for every North Carolinian. Any changes to the public tax system must preserve or expand the public value we’re currently delivering.
Here are four ways to create a more fair taxation system across North Carolina.
Fix # 1: Tax High Earners and the Wealthy a Little Bit More Than Everyone Else
North Carolina currently has a flat tax system. Corporate income taxes are scheduled to drop to 0% by 2030, while personal income taxes are dropping to 3.99% this year and may drop further to 3.49% next year.
As far back as 1921, North Carolina had different tax rates for different income levels ranging from 3-7%. The historical ceiling for state income taxes on the highest earners was 8.5%. Different incomes were taxed at different levels until 2013, when the legislature introduced a flat tax rate of 5.8%.
To preserve the public good and distribute the tax responsibility more fairly, we can create different income tax rates for high earners and low earners and close loopholes that allow high-wealth individuals to hide some of their assets from taxation.
And that gets us into property taxation.
Fix # 2: Tax Extra Residences More Than Primary Residences
While income has been taxed at different levels relatively recently, the North Carolina Constitution (Article V, Section 2(2)) currently prohibits the government from taxing different types of property at different rates. This provision is called the “uniformity clause.” That means you cannot tax properties owned by high wealth individuals or corporations at a different rate than properties owned by everyone else, nor can you tax certain kinds of properties (like mansions) at a higher rate than other kinds of properties (like small starter homes).
If the state legislature is willing to advance a constitutional amendment, then it should also consider amending the uniformity clause and establishing guidelines for local governments to set a different property tax rate for additional properties after the taxpayer’s primary residence.
Fix # 3: Reform the Property Valuation System
Property taxes are calculated by applying a tax rate to personal property, like a home or a vehicle. The property taxes people pay on their homes is actually the combination of multiple different assessments: the assessed value of the land on which the home sits, and the value of all the improvements to the land.
In communities across the United States, expensive properties tend to be undervalued and inexpensive properties tend to be overvalued. That means the more you pay for your house, the more likely you are to pay less than your fair share in taxes, and the less you pay for your house, the more likely you are to pay more than your fair share.
To ensure that everyone is taxed fairly, the Department of Revenue and county-level Tax Assessors should ensure that property is valued fairly. That means running revaluations annually, not every just every eight years, which is the current minimum under state law. It also means increasing the staffing and training of Assessors’ offices so that they can do more hands-on work visiting and assessing properties and so that they can hold their own against the types of threatening legal tactics that some commercial property owners have used to secure discounted valuations.
Fix # 4: Expand Eligibility for Property Tax Reductions
North Carolina provides three different programs that allow homeowners to reduce their property taxes. Here’s how they work:
Homeowners who are 65+ or totally and permanently disabled who make less than $38,800 per year can qualify for an Elderly or Disabled Homestead Exemption on their primary residence. This reduces their property’s taxable value by $25,000 or by 50% of the total appraised value – whichever is greater.
Homeowners who are 65+, make less than $X (the number changes year to year), and have owned and resided in their permanent residence for multiple years (usually 5+ years) can also choose to apply for the Circuit Breaker Homestead Exemption instead. In 2025, qualifying homeowners earning $38,800 or less had their property taxes limited to 4% of their income. Qualifying homeowners earning between $38,800 and $58,200 had their property taxes limited to 5% of their income.
Finally, disabled veterans who were honorably discharged and have a total and permanent service-related disability can reduce the taxable value of their permanent residence by up to $45,000. There are no income or age restrictions on this program.
The simplest way to expand eligibility would be to increase the eligibility of low-income individuals to qualify for taxable value reductions by reducing the years of ownership required for eligibility and attaching the income threshold to a percentage of the statewide median income (which is currently about $74,000).
Effective Solutions Need Nuance
Simple solutions are appealing because they are easy to understand. But the North Carolina government provides a wide range of critical services that are anything but simple, and figuring out how to fairly allocate responsibility for public goods across all of the state’s residents is anything but easy.
However, it’s entirely possible for the wealthiest North Carolinians to pay just a little bit more in taxes to support facilities and services that belong to every North Carolinian: safe public schools and skilled public school teachers; salaries, equipment, and training for emergency first responders and law enforcement officers; fully staffed court systems and prosecutors’ offices; funding for new mental health and addiction programs; and other great programs.
We can allocate responsibility for these and other shared goods in a way that is fair, reasonable, and affordable. Let’s rise to the challenge.
