by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Millions of Americans will see their state government take a smaller bite out of paychecks when 2023 begins in a few weeks. That’s because, when the Waterford Crystal ball comes down in Times Square to close 2022, income tax rate reductions will take effect in a handful of states.
North Carolina’s 4.99% personal income tax will fall to 4.75% on January 1, 2023. Though that reduction may sound modest to some, it sets the state income tax rate — which, along with individuals and families, is paid by most small businesses — nearly 38% lower than the top rate levied in 2013.
On New Year’s Day one decade ago North Carolina had the highest personal income tax rate in the southeastern U.S., with a top rate at the time of 7.75% coupled with a 6.9% corporate income tax. Thanks to reforms enacted under the leadership of Senate President Pro Tempore Phil Berger (R) and Speaker Tim Moore (R), by the end of 2026 North Carolina’s corporate income tax will completely phase out and the personal income tax rate will drop to 3.99%.
By making the tax code less burdensome and more competitive over the past decade, but doing so in a responsible manner that did not lead to budget deficits, the tax policy changes implemented in North Carolina have been viewed by governors and lawmakers in other states as a model for pro-growth tax reform. Though Democratic politicians, progressive pundits, and some media outlets have repeatedly tried to portray Kansas and the tax code changes enacted there in 2012 as the epitome of conservative tax reform, conservatives themselves have been pointing to North Carolina, not Kansas, as the model for how to do tax reform the right way.