RALEIGH — Newly published figures on tax burdens in the United States confirms that North Carolina now has a significantly higher state and local tax burden than Massachusetts, according to a preliminary analysis by the John Locke Foundation. The Washington-based Tax Foundation released its annual “Tax Freedom Day” report in April, comparing all 50 states and the District of Columbia in federal, state, and local tax projections for 2002. State and local taxes in the Tar Heel State are projected to consume 10.1 percent of personal income, yielding an average tax burden higher than most other Southern states and one of the highest such burdens in North Carolina history.
By comparison, state and local taxes consume 9.5 percent of personal income in so-called “Taxachusetts.”
North Carolina now ranks 29th in the nation in state and local tax burden, just below the national average of 10.2 percent. Among nearby states, only Georgia (at 10.2 percent) exceeds North Carolina in state and local taxes, while South Carolina (10 percent), Virginia (9.4 percent), Florida (9.3 percent), Alabama (9.1 percent), and Tennessee (8.4 percent) rank lower.
“Because of recent increases in state income and sales taxes, local property taxes, and business and consumer taxes, North Carolina saw its tax ranking worsen during the past year,” said John Hood, president of the Locke Foundation.
“When you consider that North Carolina also levies relatively high marginal tax rates — particularly on income — it becomes obvious that our state’s tax posture is one reason our economy has been suffering more than those of our neighboring states.”
Last week, the Locke Foundation released a survey of 435 business executives around the state. The respondents ranked “state and local taxes” as the most serious problem facing North Carolina’s economy, and twothirds said state and local officials should balance their budgets solely through spending reductions rather than raising taxes.
Hood pointed out that the total tax burden in North Carolina — including federal taxes — actually improved somewhat from 2001 to 2002. The day the average North Carolina stops working for the government and starts working for himself or herself improved two days this year to April 20, according to the Tax Foundation report. “If not for the efforts of President Bush and the Republicans and Democrats in Congress who enacted tax relief last year, North Carolina’s overall tax burden would have worsened considerably,” he observed. “Unfortunately, even our total tax burden, while an improvement over last year’s, is still quite a bit higher than it was just 10 years ago.”
Hood also noted that while some political observers blame North Carolina’s current fiscal deficits on “big” tax cuts during the 1990s, the new data demonstrate that taxes went up rather than down over the past decade. In 1992, state and local taxes took 9.6 percent of personal income in North Carolina, compared with 10.1 percent projected for 2002.
The John Locke Foundation, founded in 1990, is a nonprofit, nonpartisan research institute devoted to state and local public policy issues in North Carolina. The organization is named after the distinguished 17th century educator, statesman, and philosopher of liberty John Locke, who also wrote the first constitution for the colony of Carolina. For more information about the Foundation’s fiscal policy research, call John Hood or Dr. Roy Cordato at 919-828-3876 or visit http://www.JohnLocke.org or http://www.CarolinaJournal.com.