The Tax Foundation

North Carolina

The Facts on North Carolina’s Tax Climate

Last updated July 1, 2009

Here are some basic facts on North Carolina’s tax system and how it compares to other states:

Tax Freedom Day Arrives on April 9 in North Carolina
Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2009, North Carolina taxpayers had to work until April 9 to pay their total tax bill (ranked 25th highest nationally). That's four days earlier than national Tax Freedom Day (April 13). The Tax Freedom Days for neighboring states are: Tennessee, April 5 (ranked 36th nationally); Georgia, April 12 (ranked 17th nationally); South Carolina, April 4 (ranked 38th nationally); and Virginia, April 16 (ranked 6th nationally).
Full study of Tax Freedom Day, nationwide and in each state

North Carolina's State/Local Tax Burden Slightly Above National Average
Estimated at 9.8% of income, North Carolina's state/local tax burden percentage ranks 20th highest nationally, just above the national average of 9.7%. North Carolina taxpayers pay $3,663 per capita in state and local taxes.
North Carolina's State-Local Tax Burden, 1977-Present
Other States' State/Local Tax Burdens
Historical Chart Comparing All States' State/Local Tax Burdens from 1977 to 2008

North Carolina's 2010 Business Tax Climate Ranks 39th
North Carolina ranks 39th in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. Neighboring states ranked as follows: Tennessee (17th), Georgia (29th), South Carolina (26th) and Virginia (15th).
50-State Comparison of Business Tax Climates (data only)
2009 State Business Tax Climate Index, Sixth Edition (full study)

North Carolina's Individual Income Tax System
North Carolina's personal income tax system consists of three brackets, with a top rate of 7.75% kicking in at an income level of $60,000. Among states imposing personal income taxes, North Carolina's top rate ranks 12th highest nationally. North Carolina's 2006 income tax collections were $1,079 per person, which ranks 13th highest in the nation. 
50-State Table of Individual Income Tax Rates
50-State Table of State Individual Income Tax Collections
50-State Table of State and Local Individual Income Tax Collections Per Capita

North Carolina's Corporate Income Tax System
North Carolina's corporate tax structure consists of a flat 6.9% rate. Among states levying corporate income taxes, North Carolina's top rate ranks 27th highest nationally. In 2007, state-level corporate tax collections (excluding local taxes) were $175 per capita, ranking the state the 21st highest nationally.
50-State Table of Corporate Income Tax Rates, 2000-2009
50-State Table of State and Local Corporate Income Tax Collections Per Capita and Per Household, 2005
50-State Table of State Corporate Income Tax Collections Per Capita, 2006

North Carolina's Sales Tax Rate below National Median; Cigarette Tax Relatively Low
North Carolina's state sales tax rate stands at 6.75%, above the national median of 6%. State and local governments combined collected $773 per capita in general sales taxes in 2006, which ranks 34th highest nationally. North Carolina's gasoline tax is variable and currently stands at 30.2 cents per gallon, which ranks 14th highest nationally. North Carolina's cigarette tax stands at 35 cents per pack of twenty and ranks 47th highest nationally. The sales tax was adopted in 1933, gasoline tax in 1921, and the cigarette tax in 1969. 
50-State Table of Sales and Excise Tax Rates
50-State Table of State and Local General Sales and Gross Receipts Tax Collections Per Household and Per Capita, Fiscal Year 2005

North Carolina Property Taxes: Comparatively Low
North Carolina's localities collected $796.12 per capita in property taxes in fiscal year 2006, which is the latest year the Census Bureau published state-by-state property tax collections. North Carolina is one of the 13 states that collect no state-level property taxes.  Its per capita property tax collections in FY2006 rank 38th nationally. 
State property tax collections per capita by state

Federal Tax Burdens and Expenditures: North Carolina is a Beneficiary State
North Carolina taxpayers benefit slightly more than the average state's taxpayer from federal spending. Per dollar of Federal tax collected in 2005, North Carolina citizens received approximately $1.08 in the way of federal spending. This ranks the state 27th nationally. This represents a rise from 1995 when North Carolina received $0.95 per dollar of taxes in federal spending, ranking it 36th nationally. Neighboring states and the amount of federal spending they received per dollar of federal taxes paid are: Tennessee ($1.07), Georgia ($1.01), South Carolina ($1.35) and Virginia ($1.51).
Comparing the amount of federal taxes sent to Washington with the amount of federal spending coming back to the state

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