Part of the North Carolina House’s proposed tax package would raise North Carolina’s highest marginal tax rate to 8.5 percent. The new rate would be tied for the 7th highest top marginal rate in the nation, and put North Carolina’s top marginal rate head and shoulders above other top rates in the Southeast.
North Carolina: Closed for Business
Because the majority of businesses actually pay the personal income tax rate, such an extremely high personal tax rate would send a strong message to small businesses and entrepreneurs: “You are not welcome in North Carolina, take your jobs somewhere else!”
North Carolina’s Working Poor and Smallest Businesses Pay Higher Rate Than Millionaires in Surrounding States
For a little more perspective, understand that North Carolina’s personal income tax rates are already exceedingly high. In fact, North Carolina’s lowest marginal rate is as high or higher than every other Southeastern state’s highest marginal rate, save South Carolina. And South Carolina recently created a special personal income tax rate for its pass-through businesses of 5 percent.
In other words, the first taxable dollar earned by North Carolina’s poorest workers and smallest businesses is taxed at a higher rate than the millionth taxable dollar earned by a millionaire in virtually every other Southeastern state.