In this year’s budget, the corporate income tax was lowered from 5 percent to 4 percent, but legislators made a key change to the calculation of the tax. Historically, North Carolina calculated its corporate income tax on a mix of property, payroll, and sales variables. Now the state will implement a single sales factor, which is used in 26 other states, including neighboring Virginia, Georgia, and South Carolina. Moreover, a new trigger was put in place that ties an additional one-percent reduction to the tax if the state collects a certain amount of tax revenue within a fiscal year.
The Tax Foundation created this map, showing the east coast and where North Carolina would fall if the rate does lower to 3%.