The Tax Foundation

Tax Data

North Carolina

The Facts on North Carolina’s Tax Climate

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

Tax Freedom Day Arrives on April 17 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 2008, North Carolina taxpayers had to work until April 17 to pay their total tax bill (ranked 27th highest nationally). That's six days earlier than national Tax Freedom Day (April 23). The Tax Freedom Days for neighboring states are: Tennessee, April 11 (ranked 44th nationally); Georgia, April 19 (ranked 23rd nationally); South Carolina, April 16 (ranked 33rd nationally); and Virginia, April 25 (ranked 12th nationally).

Tax Freedom Day has been projected using the most up-to-date economic and budget projections from official government agencies. However, Tax Foundation estimates of average state and local tax rates for 2008 will not be released until later this spring as we await more up-to-date data from various government agencies.
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 2008 Business Tax Climate Ranks 40th
North Carolina ranks 40th 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 (16th), Georgia (20th), South Carolina (26th) and Virginia (14th).
50-State Comparison of Business Tax Climates (data only)
2008 State Business Tax Climate Index, Fifth Edition (full study)

North Carolina's Individual Income Tax System
North Carolina's personal income tax system consists of four brackets, with a top rate of 8% kicking in at an income level of $120,000. Among states imposing personal income taxes, North Carolina's top rate ranks 9th highest nationally. North Carolina's 2005 income tax collections were $972 per person, which ranks 14th 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 2006, state-level corporate tax collections (excluding local taxes) were $147.69 per capita, ranking the state the 23rd highest nationally.
50-State Table of Corporate Income Tax Rates, 2000-2008
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 4.25%, below the national median of 5.4%. State and local governments combined collected $1,086 per capita in general sales taxes in 2005, which ranks 38th highest nationally. North Carolina's gasoline tax is variable and currently stands at 30.2 cents per gallon, which ranks 15th highest nationally. North Carolina's cigarette tax stands at 35 cents per pack of twenty and ranks 44th 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 $6,093,170,000 in property taxes in fiscal year 2004, 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, meaning its per capita property tax collections equaled $713 for all levels of government in FY2004, ranking it 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

Tax Data from The Tax Foundation