North Carolina tax amendments raise questions for communities

North Carolina voters will decide this November whether to place new limits on state and local tax rates through two proposed amendments to the state constitution. 

Senate Bill 1080 places a measure on the ballot on amending the constitution to lower the cap on state income taxes from 7% to 3.5%. House Bill 1089 places a measure on the ballot on an amendment to require lawmakers to establish limits on property tax revenue, without specifying what those limits would be. 

As voters prepare to weigh the measures, county leaders are considering what property tax restrictions could mean for their ability to respond to rising costs and provide public services. In smaller communities, local governments operate with limited budgets: They can’t levy income taxes and have limited authority to raise sales tax rates, so they rely heavily on property tax revenue to fund everything from emergency services to recreation programs. 

Chowan County is one of the state’s smallest counties. It has 14,700 residents and an operating budget of about $26 million dollars.

Chowan County Manager Kevin Howard said county leaders have been closely watching how changes to federal funding contained in the budget law President Donald Trump signed in July 2025 could affect local budgets. Howard said counties are particularly concerned about funding cuts affecting the Supplemental Nutrition Assistance Program, or SNAP, which provides food assistance to low-income households. 

As they monitor these challenges, Howard said, his county is continuing to deal with inflation and rising operating costs that are making it more expensive to provide services and replace equipment.

“Our fuel costs are going up. An ambulance for us now is roughly $300,000, where five, six, seven years ago, it was $150,000 to do a remount before you put a box [patient compartment] and get a new chassis, and use an existing box that you have,” Howard said. “Last year we were looking at new servers for the county — elected not to get those — it would have cost $100,000. This year they’re approaching $400,000 to do the same thing, so that’s a huge change in cost for us.”

Howard said rising costs are harder to absorb when local governments have fewer options to generate revenue. He said H.B. 1089 raises questions for county leaders because voters would be asked to approve the constitutional amendment before lawmakers decided how property tax revenue limits would be calculated or applied.

“I guess a concern for us is most of our expenses are things that the state or federal government mandates, or things we have to do by general statute, and we can decide how much we want to spend on some of those, but a lot of them we can’t. We’re losing versatility,” Howard said. 

Howard explained restrictions on property tax revenue could also affect how counties prepare for major projects and long-term expenses. 

“If you have a big expansion that’s coming up, like say you’re going to build a new jail or a new school, do you raise taxes over time to make sure you can get enough out of that debt service payment instead of doing it one time, or, you know, how are you going to plan things?” he said. “It’s going to change things for us, as far as that goes. We think — you know, as I said, we don’t know for sure what’s going to happen.”.

Policy analysts say the income tax amendment would have broad implications for state services and future budgets. 

Logan Harris, director of research at the NC Budget & Tax Center, said the proposal would not immediately save residents money, because although the current cap is 7%, the actual current rate is a flat 3.99%, and it is already set by statute to fall to 3.49% next year. Lowering the top rate would, however, limit lawmakers’ ability to raise revenue if economic conditions change or additional funding is needed. 

“What it means in the long term is that North Carolina will be really constrained in our ability to raise revenue to fund the services that people rely on, and it means that even the richest people in our state, people making multimillion dollars a year, that it wouldn’t be possible to tax them at a rate higher than 3.5%,” Harris said. 

Harris said the state’s tax revenue helps support a range of services and programs, including public education, healthcare, childcare investments, transportation infrastructure, and state parks. She noted that North Carolina and other states are facing increasing pressure to fund schools, healthcare and food assistance programs as federal support for services declines. 

She said when governments have fewer revenue options available, policymakers turn to other sources of funding. 

“I think that the other things that we’ve seen go up when tax revenue isn’t available are things like fines and fees, so, service fees, fines in the criminal justice system, and those also are really regressive. They tend to take up the largest share of income for people with the least,” Harris said.

Republican leaders have promoted the amendments as a way to deliver property tax relief and help North Carolinians save money. 

House Speaker Destin Hall called the proposals “Affordability Amendments” in a Facebook post. 

“These amendments will lower taxes, provide protection for homeowners, and ensure more money stays in the pockets of North Carolina families,” Hall said.

Democrats have pushed back on that message. 

State Rep. Lindsey Prather, a Democrat from Buncombe County, argued in a Facebook post that the property tax proposal itself does not establish specific limits. 

“The amendment doesn’t have any details or information in it,” Prather said. “It authorizes the Legislature to later on pass a bill that’s going to have that detail and information in it.”

Prather questioned why lawmakers were pursuing a constitutional amendment when the General Assembly already has the authority to pass tax legislation.  

“So why would Republicans propose an amendment that they don’t actually need and that isn’t going to do anything anyway?” Prather said in the social media post. “Because this is all about getting voters out to the polls in November. They are really worried that Republicans aren’t going to come out to vote. Trump isn’t on the ballot. Their U.S. Senate candidate is a dud. And voters are really, really worried about the economy right now. They’re not happy with how much things cost. So they’re banking on people coming out to vote on what they think is going to bring costs down.” 

The amendments now head to the voters, who will decide in November whether to add the new tax limits to the North Carolina Constitution. Whether they view the measures as taxpayer protections or potential constraints on future funding, the outcome could shape how state and local leaders respond to rising costs and fund public services in the years ahead.