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NC Budget and Tax Center

During yesterday’s press conference announcing the latest tax cut package proposed by the General Assembly and Governor McCrory, we heard a lot about the need for North Carolina’s economy to become competitive again as justification for their plans to steeply reduce tax rates on corporations and wealthy individuals.

But the evidence just keeps piling up that North Carolina’s economy is already competitive—regardless of the Tarheel State’s personal and corporate income tax rates. In the latest piece of news from the U.S. Bureau of Economic Analysis, it turns out that North Carolina experienced some the fastest economic growth in the nation in 2012, as measured by the annual change in real per capita Gross Domestic Product—a clear sign that our state is far more economically competitive than our legislative leaders try to pretend.

By the numbers, here’s how North Carolina’s economic growth stacks up to other states:

  • North Carolina’s economy is one of the most competitive in the nation, growing by 1.76 percent last year, above the national average of 1.7 and faster than 32 other states.
  • North Carolina’s growth rate is competitive in the Southeast, fully half a percentage point above the regional average.
  • North Carolina’s growth rate ranked fifth out of 13 Southern states last year, outpaced only by Texas, Tennessee, Mississippi, and South Carolina. All of these states have lower median wages and higher poverty rates according to the Census Bureau than North Carolina, suggesting that whatever factors that are spurring their economic growth is not benefitting working families.

If North Carolina’s economy was uncompetitive as Governor McCrory and our legislative leaders contend, it’s hard to see it in how our state stacks up in terms of economic growth.

NC Budget and Tax Center

Despite the claims that North Carolina needs to cut taxes and shift the tax load on to middle-class and low-income taxpayers to remain competitive, such an approach will actually undermine the competitiveness that our state has achieved. If we look across a range of metrics on outcomes for North Carolinians, businesses and the economy, North Carolina is indeed competitive. 

Tax rates are not the sole factor that drives the state’s economy nor does it make or break the reputation of North Carolina as a desired place to raise a family and operate a business. Below are four examples, among many, that highlight areas in which North Carolina has made positive progress. Read More

NC Budget and Tax Center

There has been a lot of talk in the state, national and social media world about North Carolina’s reputation as of late, and it doesn’t sound so good. Governor McCrory has repeatedly stated that he was concerned about North Carolina’s brand and intended to rebrand the state to make it more business-friendly. Turns out, North Carolina is already competitive and further, the US Chamber of Commerce tells us “North Carolina is home to a collection of powerhouse research universities and a network of higher education. With innovative and high-tech enterprises spinning from places like the Research Triangle for more than 30 years, North Carolina ranks 12th overall for technology and entrepreneurship this year. The state has the 13th-highest concentration of STEM workers and ranks 4th for academic research and development intensity.”   Read More

NC Budget and Tax Center

Throughout the tax reform debate, we’ve been hearing a lot about the importance of improving North Carolina’s economic competitiveness as a route to bringing down the state’s exceptionally high unemployment rate. With the jobless rate stuck near 9 percent, unemployment is clearly a central policy challenge facing our state’s lawmakers. But lawmakers are getting it wrong when they assume that North Carolina’s unemployment is the result of poor economic competitiveness relative to other states. And it’s certainly no reason to support deep tax cuts like those embodied in all of the proposals put forward by the House and Senate.

The plain truth is that North Carolina is already competitive in attracting and growing businesses in the state.  In fact, the CEOs and consultants who make corporate location decisions have repeatedly ranked North Carolina near the top of the nation for its business climate and attractiveness to investment in survey after survey.  The U.S. Chamber’s own Enterprising States ranking puts North Carolina 12th for innovation and entrepreneurship.

The results are plain to see: North Carolina’s economy compares pretty favorably to our neighboring states (all of which have lower tax rates). Our state is leading or in the middle of the pack in nearly every major indicator of economic competitiveness—poverty, household income, and even annual per capita economic growth.

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NC Budget and Tax Center

The newest (5th version) of the Senate tax plan is said to be a modified version that addresses various concerns in early versions of the plan. Nevertheless, the bill maintains its core elements – huge tax cuts for the wealthy and profitable corporations and significant revenue loss – and returns to expanding the sales tax to more goods and services (though not as comprehensive as one of the earliest versions) in an effort to reduce the revenue loss slightly from the prior $1.3 billion to now nearly $1 billion.

The repeated claim made by Senator Berger and proponents that all taxpayers would see an income tax cut under the modified tax plan is simply not true. Cutting the personal income tax rate may appear to benefit all taxpayers but it doesn’t and the tax plan has many other moving parts that will shift the tax load to low- and middle-income taxpayers. For example, by eliminating the personal exemption allowance, the state EITC, and the additional standard deduction allowance for seniors, many taxpayers fare worse under the newest Senate plan compared to current tax laws.

Below are examples of particular taxpayer profiles in which the taxpayer would pay more in income taxes under the newest Senate plan. Read More