Where Does NC’s Tax Climate Rank This Year?

The Tax Foundation today released its new 2016 State Business Tax Climate Index. True to its name, the Index ranks the 50 states according to how conducive each state’s tax code is to job creation and economic growth.   

North Carolina holds steady at 15th in the 2016 rankings, the same slot as 2015. This follows an historic jump from 44th to 15th in one year, following the 2013 tax reforms.

After the most dramatic improvement in the Index’s history—from 44th to 15th in one year—North Carolina has continued to improve its tax structure, with additional elements of the historic 2013 reform still phasing in. The corporate income tax, which was cut from 6.9 percent to 6 percent last year, has continued its scheduled decline, falling to 5 percent in 2015. The corporate income tax is subject to a trigger mechanism that will further reduce the rate in future years when revenues are healthy. The individual income tax, which was converted from a graduated rate tax with a top marginal rate of 7.75 percent to a single-rate tax of 5.8 percent in 2014, saw a further modest cut this year, decreasing to 5.75 percent, with further reductions scheduled through 2017.

NC spent years as one of the worst tax climates, according to the rankings, but now boasts a far more competitive tax code. And we may continue to improve. A recent Tax Foundation spotlight report projected that NC could climb to 13th when the 2017 rankings come out.

Gov. McCrory’s office trumpeted the news, also crediting the 2013 reforms as a major boost to North Carolina’s competitiveness. Here’s what the governor had to say:

“Historic tax reform has significantly increased our competitiveness and strengthened North Carolina’s economy by putting more money into the budgets of working families,” said Governor McCrory. “This year’s Tax Foundation rankings are another reminder that nothing compares to the business climate of North Carolina.”