Patrick Gleason of Americans for Tax Reform compares recent tax policy in North Carolina and South Carolina. As he shares with Forbes readers, the Tar Heel State takes a better approach. (I’ve added emphasis to Gleason’s quotation of the John Locke Foundation’s Roy Cordato.)
The month of May brought the passage of state tax relief in both North and South Carolina. The proposals approved in North Carolina cut taxes for employers and most households in the Tar Heel State, whereas the tax plan approved in South Carolina is a targeted incentive package for one sports franchise.
The North Carolina House and Senate voted this month to cut the state franchise tax rate by about a third, saving in-state businesses approximately $250 million annually, and provided further income tax relief for all by raising the standard deduction.
North Carolina’s franchise tax is a punitive and opaque tax levied on businesses organized under one of the usual corporate forms, primarily C-Corps and S-Corps,” writes Roy Cordato, vice president of research at the John Locke Foundation, a Raleigh, N.C.-based think tank. “It is inconsistent with both good economics and good government. Most of the problems associated with the corporate income tax are also present in the franchise tax. But it goes a step further by taxing what tax analysts generally agree should be exempt from taxation and as a result it double taxes business assets.”
The adverse economic affects associated with this levy are why so few, only 16 states, impose a franchise tax today. “Ideally, North Carolina should follow the lead of most other states and abolish the tax,” says Cordato.
While North Carolina Republicans are focusing on approving more broad-based tax relief and increasing the job-creating capacity of in-state businesses, their counterparts in South Carolina adjourned their 2019 session this month by approving a tax incentive package for the Carolina Panthers professional football team. …