Scoring Tax Reform in North Carolina

June 12, 2013

Moving the Tar Heel State's Tax Climate from 44th to 6th Best

Washington, D.C., June 12, 2013—Today the North Carolina Senate is expected to vote on competing tax reform plans in an effort to improve the state’s tax structure and competitiveness. Offering insight on how the bills would impact taxpayers of the Tar Heel State, Tax Foundation economist Scott Drenkard delivered testimony yesterday before a hearing of the Finance Committee of the North Carolina Senate. With regards to the bills under consideration, Drenkard addressed several key components by focusing on:

  • The relationship between taxes and economic growth;
  • The effects and misconceptions about the corporate income tax;
  • The benefits of flattening income tax rates;
  • The inefficiencies of the estate tax; and
  • The importance of reforming the sales tax.

State lawmakers often compare the merits of reform proposals using their rankings on the Tax Foundation’s State Business Tax Climate Index. After running the various plans through the Index, the new Senate plan scores the best, in part because of its elimination of the corporate income tax. The plan sponsored by Sens. Bob Rucho and Bill Rabon also scores very well in the sales tax component of the Index, mainly for its correct treatment of business inputs.

“North Carolina is in a unique position to enact serious, growth-maximizing tax reforms,” said Drenkard. “It is exciting and encouraging to see so many good ideas on the table.”

The full text of Scott Drenkard’s testimony before the North Carolina Senate Finance Committee is available here.

More analysis is available in the book North Carolina Tax Reform Options: A Guide to Fair, Simple, Pro-Growth Reform by Scott Drenkard and Joseph Henchman. All Tax Foundation material on North Carolina is compiled here.

The Tax Foundation is a nonpartisan research organization that has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Borean, the Tax Foundation’s Communications Associate, at 202-464-5120 or borean@taxfoundation.org.

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