After years of being ranked in the bottom half of states in key tax policy indexes published by the Tax Foundation, North Carolina has skyrocketed to among the best states in the nation for both individual and business taxpayers. Since enacting sweeping tax reform in 2013, North Carolina has gone from being among the 20 worst states in the country to the 20 best in both the “Tax Freedom Day” and “State Tax Business Climate” rankings.
The Tax Foundation defines Tax Freedom Day as “the day when the nation earned enough money to pay its total tax bill [state, federal, and local] for the year.” It is a measure of tax burden. After making this calculation for the nation the Foundation breaks its finding down by state. Through 2014 North Carolina consistently ranked as being among the most heavily taxed when compared to the other 49 states, as measured by how many days of full time work it took for the state’s citizens to pay their total tax bill. Between 2012 and 2014 North Carolina hovered around 30th in the nation. In 2015, the year following major, across-the-board tax cuts, and 2016 the state shot up to number 19. Since federal taxes. which increased during this this period, impacts all states, state tax cuts are the only meaningful explanation for this.
An even more dramatic change was seen in the Foundation’s Business Tax Climate Index. This is based on the structure and rates of every major tax levied in the state, including personal and corporate income taxes and sales and property taxes. So, while it bills itself as assessing the business tax environment it is, in reality, a ranking of states by tax policy more broadly. Between their 2013 and most recent 2017 rankings, North Carolina went from 41 in 2014 (44 in 2013) to 11 in 2015 where it has stayed ever since.
