The Tax Foundation, a national tax policy analysis organization, has moved North Carolina up to #10 in the 2021 edition of its annual State Business Tax Climate Index.
The Tar Heel State ranked higher than all its neighboring states, and second only to Florida in the southeast.
The lofty ranking is a reflection of a decade of conservative tax reforms that have made North Carolina far more competitive for jobs and investment. You may recall that under Democratic leadership and prior to the historic 2013 tax reforms, North Carolina suffered from the 7th worst state business tax climate, according to the Index. The 2013 reforms shot North Carolina immediately up to 17th best, and subsequent tax cuts have bolstered our state’s ranking into the top ten.
The Tax Foundation’s State Business Tax Climate Index is “designed to show how well states structure their tax systems and provides a road map for improvement.” North Carolina is one of only three states in the top ten that levy all three major state taxes (personal income, corporate, and sales).
North Carolina received high marks for its relatively low – and flat – personal income tax, along with the lowest corporate income tax rate of any state that levies one. Room for improvement is left in the state’s sales tax and property tax, for which NC received scores in the middle of pack.
State tax climates are important, according to the report, because “the specifics of a state’s tax structure matter greatly,” and “elements of a state tax system can also enhance or harm the competitiveness of a state’s business environment.”
While we do live in a global economy, the report reminds us, “states’ stiffest competition often comes from other states.” This makes the business tax climate index so important to the prospects for job growth and a growing economy.
North Carolina has made great strides in improving its economic competitiveness, we can’t afford to undo this progress and revert back to the liberal tax and spend policies of the past.