Writing at realclearpolicy.com, Locke President Donald Bryson makes the critical point that sound fiscal decisions matter. He points to North Carolina as the model for other states in being able to weather the COVID-19 pandemic without cutting core services or raising taxes, as other states are doing. Ours really is an economic success story. And it’s thanks to the steady hand of fiscally conservative leaders over the past few years.
The Tar Heel State was ravaged by the Great Recession, hitting the fifth-highest unemployment rate in the nation at 11.4% in mid-2009. In 2011, state lawmakers began a series of budget reforms to meet the state’s constitutional mandate of a balanced budget. Since that time, state budget growth has stayed at or below the combination of population growth and inflation – which means that legislators wisely chose to prevent the size of government from growing faster than its supporting economy.
Then in 2013, then-Gov. Pat McCrory and the state legislature began cutting taxes. They lowered personal income tax from a top rate of 7.75% to a flat 5.75%, cut the corporate rate from 6.9% to 5%, and eliminated the death tax. All told, state lawmakers have passed four separate tax reform packages since 2013. Additionally, lawmakers reformed welfare to encourage work and prevent the state from falling further into debt to the federal government. As a result, North Carolinians have prospered. Before the Covid-recession, North Carolina’s unemployment rate was down to 3.6%, and median household income has increased by more than $13,000 from 2013 to 2019.
North Carolina’s tax reforms are the key reason the state came back from ranking an abysmal 44th in state business tax climate in 2013 to finish in 10th place in a 2021 Tax Foundation report.
What comes next for North Carolina? Hopefully, more positive economic news.
On June 9, North Carolina Senate passed a bold new tax reform package, with bipartisan support, which will cut personal income tax rates from a flat 5.25% to 4.99%, increase the standard deduction, and phase out the state corporate income tax by 2026.
Will it help North Carolina? Likely so. The corporate tax phase-out alone will radically boost the state’s economy. According to a 2019 academic study published by the Civitas Institute, ending North Carolina’s corporate income tax will increase state gross domestic product by $17 billion or by 2.1%, and lift statewide salaries per employee by $1,546 over the next decade.
These new tax cuts are not a done deal. There is still the political issue of a Republican legislature negotiating with Gov. Roy Cooper (D) on the state budget.
Be sure to read the entire piece.