Study: NC’s largest counties increased taxes beyond inflation, population growth

A recent study from the John Locke Foundation found that property tax collections across the state’s 10 largest counties exceeded inflation and population growth by $2.7 billion over the past 10 years. 

As property taxes have risen across the state, this issue has received attention from the North Carolina General Assembly, as it prepares to return for the short session, which begins on April 20. Levy limits, which would restrict the annual growth rate of property tax revenue, are among policy options being considered.

Misconceptions that limits would prevent revenue from keeping pace with growth and rising costs, and force cuts to local government budgets, have clouded the discussion, according to the study, which aims to provide clarity by analyzing property tax revenue growth over the past decade in the state’s 10 largest counties. 

“The analysis compares property tax revenue growth in North Carolina’s 10 most populous counties over the past decade (FY 2016–26) with a benchmark that limits revenue growth to inflation plus population growth (CY 2014–24),” Joseph Harris, author of the study and fiscal policy analysis for the John Locke Foundation, told the Carolina Journal. “On average, actual county property tax revenues increased 63% while the benchmark would have allowed 51% growth.” 

Nine out of the 10 counties collected more revenue over the decade than would have been allowed by the levy limit. Cabarrus, Wake, Durham, Buncombe, Guilford, Forsyth, Gaston, Mecklenburg, New Hanover, and Cumberland were the counties analyzed in the study. 

“The largest gaps occurred in Cabarrus and Wake counties, where property tax revenues grew 111%and 103%,respectively, compared with 68% and 63% under the benchmark,” said Harris.  

The largest gap between the benchmark set by the levy limit and the actual growth in property tax revenue is in Cabarrus County. With property tax revenue increasing by 111% under the levy limit, this growth would have been capped at 68%. This accounted for about $326.6 million in additional taxes than would have been paid under the levy limit. 

Cumberland County is the only county where the property tax revenue grew within the levy limit, with property tax collection increasing by only 14% as opposed to the levy limit’s cap of 35%, according to the study. Taxpayers paid about $28.4 million less than what they would have paid under the full amount allowed by the levy limit. 

The study further outlines important features of designing such a policy to ensure its implementation is effective as intended. 

“A well-designed levy limit that aligns property tax revenue growth with inflation and population growth is precisely the kind of policy that can protect taxpayers while preserving local government flexibility,” said Harris.   

Levy limits do not cut budgets; rather, they place guardrails on the acceleration of property tax rate growth, so counties can keep pace with inflation and population while reigning in excessively rapid tax collection growth, according to the study. While many counties would feel little impact from such a policy, others would have to roll back the accelerated rate at which property tax rates increased over the last decade. 

“Study: NC’s largest counties increased taxes beyond inflation, population growth” was originally published on www.carolinajournal.com.