Supporting balanced tax reforms that boost NC’s national and global competitiveness.
Making North Carolina the best place in the world to live, work, learn, play, and do business is no easy feat, but our state has made phenomenal strides over the last few years toward that goal. A driving factor behind these improvements has been the balanced business tax climate we have helped to build here in North Carolina.
The NC Chamber advocates for tax policy that meets five key principles we identified after conversations with our members: competitiveness, equity, efficiency, simplicity, and certainty. These fundamental principles ensure any tax modernization efforts we support will improve North Carolina’s overall business climate by accomplishing important objectives like streamlining burdensome regulations, improving outdated systems, and simplifying complicated policies.
As the NC Chamber continues to pursue tax policy improvements that invite an ever-greater diversity of businesses and top-level talent to our state, we remain focused on protecting the competitive gains we’ve already made to keep our state improving in the face of a constantly shifting nationwide tax landscape.
The Current Challenge
Predictability and certainty are the cornerstones that anchor North Carolina’s reputation as one of the best states in the nation for business. Before 2013, our state had one of the least competitive tax climates in the nation: the 44th worst, according to the nonpartisan Tax Foundation. But after a series of Chamber-supported tax reforms reduced both the individual and corporate tax rates, our tax climate has improved by leaps and bounds. In fact, in 2021, North Carolina cracked the top 10 list for the first time in the Tax Foundation’s annual tax climate rankings as we were rated the 10th best business tax climate in the nation. Additional research released by the Tax Foundation in early 2021 found that North Carolina businesses enjoy some of the lowest effective tax rates in the country*.
However, a number of potential roadblocks threaten to undermine the strong, predictable tax climate we have worked hard to build here in North Carolina. Major obstacles impacting job creators include audit and disallowance activity that is retroactively threatening the delivery of promised tax credits for investors in renewable energy development as well as the continued imposition of a franchise tax that, while simplified and reduced thanks to NC Chamber advocacy in 2021, still acts as a disincentive for some businesses who may look to locate asset-rich investments in the state.
The NC Chamber and our allies succeeded in securing a number of additional tax reforms during the 2021 legislative session, including a reduced and simplified franchise tax that will lower costs and complications for many North Carolina businesses at tax time. After these reforms were enacted, the Tax Foundation conducted another analysis of our tax climate, finding that the new reforms, if fully phased in, would propel our state even further up the charts to the fifth best state for business taxes. Though North Carolina fell one spot, to the 11th best business tax climate, in the Tax Foundation’s 2022 State Business Tax Climate Index, that was only because North Carolina’s reforms came too late in the 2021 session to be factored in. Learn more
*Overall tax climate rankings derived from the Tax Foundation’s 2021 State Business Tax Climate Index and 2022 State Business Tax Climate Index; data on effective tax rates of NC businesses derived from the Tax Foundation’s Location Matters 2021: The State Costs of Doing Business study and supplementary North Carolina-focused white paper.
In addition to these efforts, the NC Chamber Government Affairs team advocates for a jobs agenda that will continue to keep NC first in business.
Recent wins include:
- 2021: State budget included numerous measures that built on previous competitive tax reforms secured by the NC Chamber, including a reduced and simplified franchise tax on business assets that will lower costs and complications for businesses, like many advanced manufacturers, with asset-rich investments; a phased reduction of the personal income tax (which applies to many small- and medium-sized businesses that operate as passthrough entities); federal conformity regarding the taxation of Paycheck Protection Program loans; and the extension of the Mill Rehabilitation Tax Credit (until 2030) and the Historic Rehabilitation Tax Credit (until 2031), protecting key incentives that spur economic development in smaller communities and rural areas.