The nonprofit Tax Foundation has released its State Business Tax Climate Index each year since 2003, distilling complicated tax environments into a simple and easy-to-understand ranking. The index is focused on how states generate revenue, not how much.
Though many more factors are involved, “the evidence shows that states with the best tax systems will be the most competitive at attracting new businesses and most effective at generating economic and employment growth,” according to the Tax Foundation.
Yesterday marks the release of the 2023 State Business Tax Climate Index. North Carolina ranked 10th overall for the third consecutive year. The index measures states’ tax climates using the tax rates from July 1, 2022, the start of Fiscal Year 2023 in most states.
The five sub-indexes are weighted according to their variance across the states in that category. Personal income taxes are weighted most as states have more room to compete on this tax. Sales taxes are weighted second highest, followed by corporate income, property, and unemployment insurance taxes.
North Carolina scored well on each index.
Just 10 years ago, on the 2013 index, North Carolina ranked 44th overall. This was before conservative legislators overhauled the state tax code. Since then, North Carolinians of all income levels have benefitted from lower tax bills.
Other states have seen our incredible progress and followed suit, making the state tax climate more competitive overall.
Thanks to recent reforms, North Carolina will continue to give money back to the families who earned it. In 2023 our personal income tax rate will decrease to 4.75%, and in 2025, our corporate income tax rate will begin phasing out entirely.
The Tax Foundation reminds us that even in a global economy, the fight for jobs is amongst states. Increased competition among states is a good thing. It means we must continue to pursue reforms and maintain our legacy as a national leader on tax reform.