by Paige Terryberry
Senior Analyst for Fiscal Policy, John Locke Foundation
North Carolina Secretary of State Elaine Marshall announced during this month’s small business week that new business filings are still at near-record levels in North Carolina. During the first four months of 2023, North Carolinians created 60,000 new businesses. This is similar to record levels of business creation in the first quarter of 2021 and 2022.
According to the release, “In addition to near-record new business creations, the Secretary of State set a record for the number of Annual Reports filed by businesses between January and April of 2023. Since January, more than 461,000 Annual Reports have been processed.”
Last year, CNBC named North Carolina the nation’s top state for business. And this year, a Forbes Advisor report ranked North Carolina as the 6th best state to start a business in 2023 using metrics of business costs, including taxes, business survival rate, GDP per capita, workforce and cost of living.
North Carolina has a competitive tax climate. Our corporate income tax is scheduled to phase out by 2030. The Republican-led General Assembly is expected to further lower the personal income tax rate with the next budget, which would benefit small businesses.
The uptick in business starts is good and encouraging news, especially as our nation heads into a recession. Entrepreneurs are launching businesses despite the economic warning signs. Yet after the government deprived businesses of their property, livelihood, and ability to pay employees during the Covid lockdown, it’s justified to question – though difficult to quantify – how much of the business growth is re-starts.
Business regulations are incredibly harmful and lawmakers should continue to ensure regulatory burdens are minimal. For example, if a rule or set of rules has costs projected in excess of a certain amount, that rule should not take effect without scrutiny from the legislature.
Business taxes also hamper startups and ultimately stifle competition and wages in the state. The corporate income tax is set to phase out, and the legislature is poised to further lower the personal income rate, a move that will benefit individuals and small businesses. To encourage more North Carolinians to start a business, the next state budget should further simplify the franchise license tax and repeal the harmful, redundant privilege license tax that disproportionately affects a handful of sectors.