From Rhino Reader. “Professor”.
North Carolina’s tax-cutting strategy deserves a closer look, particularly as voters consider a constitutional amendment requiring limits on local property-tax increases.
Since 2013, the General Assembly has repeatedly reduced state personal and corporate income tax rates. Supporters argue that lower taxes encourage investment, attract businesses, and leave more money in taxpayers’ pockets. Those are legitimate policy goals. But tax cuts also have a cost, and the question is whether lawmakers have adequately accounted for the consequences.
Consider the chain reaction.
First, North Carolina has reduced its personal income tax rate from 7.75% in 2013 to 3.99% in 2026. Under the state’s revised tax schedule, that rate is set to fall to 3.49% in 2027, 3.24% in 2030, and 2.99% in 2033. Meanwhile, the corporate income tax is scheduled to disappear entirely in 2030. These changes reduce the revenue available to fund state responsibilities. The state’s own budget projections show that the scheduled personal and corporate income tax cuts will substantially reduce future revenue compared with maintaining current rates.
Second, state revenue decisions do not exist in a vacuum. North Carolina’s counties and municipalities still have to provide public safety, maintain roads and other infrastructure, operate parks, support public health, and meet growing community needs. Counties also help fund public education and other essential services. When costs rise because of inflation, population growth, aging infrastructure, or increased demand, local governments must find the money somewhere.
State tax cuts do not automatically cause a dollar-for-dollar reduction in local funding. But when state government reduces its own revenue without adequately accounting for public needs and costs shifted to local governments, the resulting fiscal pressure does not simply disappear. It can show up in local budgets, service reductions, deferred maintenance, or higher property taxes.
That brings us to the proposed constitutional amendment on the November ballot. Its official wording is deceptively simple: “Constitutional amendment requiring limits on property tax increases by local governments.”
The amendment would require the General Assembly to enact laws limiting how much local property-tax levies can increase, potentially with exceptions. It does not specify the actual limit or how those exceptions would work. Those details would be left to lawmakers.
Think about the contradiction. The state reduces its own revenue through income-tax cuts, local governments continue facing rising costs, and now voters are being asked to authorize restrictions on one of the principal revenue sources those local governments use to meet their obligations.
Property taxes are not an abstract line in a government spreadsheet. They pay for services residents expect to be there when needed. According to the North Carolina Budget and Tax Center, property taxes supplied more than half of county general-fund budgets, on average, in fiscal year 2026. They also accounted for 22% of total municipal revenue in fiscal year 2024.
Of course, local governments should be accountable for how they spend public money. They should scrutinize budgets, eliminate waste, and explain tax increases to residents. But accountability is not the same as imposing a constitutional restriction before the actual rules and exceptions were established.
If local governments are prevented from raising sufficient revenue to meet legitimate needs, they have limited choices: cut services, postpone necessary investments, find other sources of revenue where legally available, or ask the state for assistance. And if the state is simultaneously reducing its own revenue, that assistance becomes more difficult to provide without changing other priorities.
The result could be a state government that celebrates lower income taxes while communities struggle to maintain the services that make North Carolina an attractive place to live and do business.
The fundamental question is not whether lower taxes sound appealing. It is whether lawmakers are being honest about the full cost of their tax policies and who ultimately bears that cost.
You cannot continually reduce the revenue available to government, leave essential responsibilities in place, and then restrict local governments’ ability to pay for them without consequences. Someone will pay. The question is whether we make that choice transparently, or allow the costs to emerge through deteriorating services, delayed infrastructure projects, and increasingly strained local budgets.
North Carolina voters should understand that connection before deciding whether to place another restriction in the state constitution.
Professor
