We have been tinkering with the franchise tax for years. While those reforms have alleviated some cost and complication, the fact remains that this is an onerous, duplicative tax and it needs to be eliminated. Now.
Perhaps most confounding about the tax is that businesses pay it even if they don’t have positive net revenue.
Levied in addition to the corporate income tax, the franchise tax presents a duplicative tax that, in recent years, has hit our state’s businesses almost as hard as the corporate tax – $646 million in 2020, compared to $657.8 million in corporate revenues. Eliminating this tax would result in direct bottom-line savings for the vast majority of job creators throughout the state.
Franchise taxes (which are also known as capital stock taxes) have grown increasingly rare as states recognize them as a major impediment to new investments. Oklahoma just recently repealed its capped franchise tax, knowing the remaining states down to fifteen. That is not a competitive position for North Carolina.
As our state emerges from the pandemic to compete on a new economic playing field, it has never been more important that we present the most welcoming front to businesses in all industries. And with recent forecasts showing our state in a historically strong position revenue-wise, the time has never been more favorable to make targeted reforms to our tax code that will support our long-term competitiveness. In the days and weeks ahead, the NC Chamber will continue to urge legislators to eliminate our franchise tax. The time is now.