The John Locke Foundation asked The Beacon Hill Institute at Suffolk University (BHI) to use its North Carolina State Tax Analysis Modeling Program (NC-STAMP®) to analyze three state tax proposals. NC-STAMP is a Computable General Equilibrium model of the North Carolina economy and is used to determine the economic and fiscal effects of a tax change when compared to a baseline scenario of no change.
BHI modeled four proposed tax changes: (1) an individual income tax calculated using federal adjusted gross income and the elimination of most credits and exemptions; (2) a 2 percent corporate income tax reduction and the elimination of several credits; (3) the expiration of the 1 percent temporary sales tax increase together with the removal of most tax preferences and (4) the expiration of the individual (2% and 3%) and corporate tax surcharges (3%). We modeled the tax changes for 2012, when they would be partially implemented, and 2013, the first full year of implementation. Table 1 displays the results.
The tax changes would provide a powerful stimulus to the North Carolina economy. Employment would increase by 14,922 in 2012, and when fully implemented in 2013 would create 17,016 by leaving more money in the hands of the state’s households and businesses. The combination of individual income tax and sales tax changes would increase real disposable income by $1.1 billion in 2012 and $1.6 billion in 2013.
Revised May 10, 2011
Download PDF file: An Economic Analysis of State Tax Changes in North Carolina (350 KB)