Uncategorized

What the Tax Foundation Rankings Don’t Say About Business Taxes in North Carolina

Once again, North Carolina ranks near the bottom (44th) of the Tax Foundation’s annual rankings of its State Business Tax Climate Index (SBTCI).

The appropriate response of North Carolina policymakers and residents to the state’s poor ranking should be: “Who cares?”

First, measuring poorly on the Tax Foundation’s business tax climate index does not mean that North Carolina’s businesses are paying a lot in state and local taxes. In fact, businesses in North Carolina are, on the whole, paying significantly less in state and local taxes as a share of the state’s economy than in almost any other state:

Second, the Tax Foundation’s SBTCI is simply an arbitrary formula based on a mishmash of 118 tax policies the Tax Foundation doesn’t like, regardless of whether those policies are considered sound tax policy.

For instance, the Tax Foundation admits that the a “dominant factor vaulting many” states to the top of their ranking system is the absence of a major tax (such as an individual income tax or a corporate income tax). Yet the National Conference of State Legislatures lists among its core revenue principles that “a high-quality revenue system relies on a balanced variety of revenue sources.”

Furthermore, the Tax Foundation expresses strong disdain for business tax credits, regardless of whether such credits are viewed by citizens and businesses as being a good investment or not. Yet an economic development expert cited frequently throughout the Tax Foundation’s report, Timothy Bartik, argues that well-targeted economic development incentives offer much more bang-for-the-buck for promoting economic development versus across-the-board business tax cuts.

In fact, contrary to the stated position of the Tax Foundation in favor of lower taxes, Bartik writes that, “for a permanent across-the-board reduction in state business tax rates, I calculate that benefits for state residents in higher earnings per capita are much less than costs.”

As we have argued frequently, North Carolina’s tax system no longer meets the needs of the people of the state and is long overdue for comprehensive reform. In looking for a set of principles to guide revenue modernization, however, state policymakers should look to what will work for North Carolinians, not for the people of the Tax Foundation’s favored states, Wyoming and South Dakota.

One Comment


  1. Carolina Cannabis Coaltion

    January 26, 2012 at 2:33 pm

    guess we will all have to get jobs in the informal economy since neither the public or private sector is doing enough about job creation.

Check Also

Some of Obama Administration’s Proposed Tax Changes Lay Groundwork for Federal, State Reform

This blog post is one in a series ...

Top Stories from NCPW

  • News
  • Commentary

The controversy over “Silent Sam,” the Confederate monument on UNC’s Chapel Hill campus, has been ra [...]

North Carolina tries to mine its swine and deal with a poop problem that keeps piling up A blanket o [...]

This story is part of "Peak Pig," an examination of the hog industry co-published with Env [...]

Few issues in the North Carolina’s contentious policy wars have been more consistently front and cen [...]

Five years ago, the U.S. Department of Justice (DOJ) filed a jaw-dropping civil rights lawsuit again [...]

Will Burr and Tillis really vote for this? For much of the 20th Century, one of the labels that Amer [...]

President Trump and Congressional Republicans aim to rebrand enormous tax cuts for the wealthiest ho [...]

20—number of years since a bipartisan coalition in Congress passed the Children’s Health Insurance P [...]

Spotlight on Journalism

We invite you to join a special celebration of investigative journalism! The evening will feature Mike Rezendes, a member of the Pulitzer Prize-winning Boston Globe Spotlight Team known for their coverage of the cover-up of sexual abuse in the Catholic Church.

Tickets available NOW!

Spotlight On Journalism

This event will benefit NC Policy Watch, a project of the North Carolina Justice Center. Sponsorship opportunities available now!

Featured | Special Projects

NC Budget 2017
The maze of the NC Budget is complex. Follow the stories to follow the money.
Read more


NC Redistricting 2017
New map, new districts, new lawmakers. Here’s what you need to know about gerrymandering in NC.
Read more