FOR IMMEDIATE RELEASE
North Carolina ranks among the nation’s best-performing states overall in a study comparing state corporate tax costs across the country, according to a Tax Foundation report released today.
The Tax Foundation, a Washington, D.C.-based think tank, produced the comprehensive Location Matters report in collaboration with the audit, tax and advisory firm KPMG LLP.
The distinctive study modeled eight different types of new and mature firms and analyzed what each would pay in state and local taxes in each state. North Carolina ranked third overall for lowest effective state tax rates for the new firms and fifth overall for the mature firms.
Click here to read the full Location Matters report.
The study points out that “over the past decade, North Carolina has implemented historic tax reforms which involved, among other provisions, reductions in the state’s corporate income tax rate and paring back targeted tax incentives.” It also notes that North Carolina has the lowest corporate income tax rate in the country at 2.5%.
“We see the national Location Matters study as a tool site selectors can use to quickly screen states for their clients, because the study illustrates how state tax burdens play out in real-world scenarios,” said Christopher Chung, chief executive officer of the Economic Development Partnership of North Carolina. “Along with a strong education ecosystem, workforce talent and solid infrastructure, a state’s tax competitiveness is an important consideration for a company deciding where to locate, remain and grow.”
“Coming on the heels of North Carolina’s top-10 finish in the Tax Foundation’s 2021 Business Tax Climate Index, the Location Matters report provides further evidence that our state has built a well-balanced tax climate that empowers job creators in all industries to thrive,” said Gary Salamido, president and CEO of the NC Chamber. “Moreover, it gives North Carolina’s leaders a new resource to help us accurately benchmark our progress and identify opportunities to improve so we can continue attracting more diverse investments.”
Tax Foundation economists designed eight model firms—a corporate headquarters, a research and development facility, a technology center, a data center, a capital-intensive manufacturer, a labor-intensive manufacturer, a shared services center, and a distribution center. Then KPMG calculated each firm’s tax bill twice in every state: once as a new firm eligible for tax incentives and once as a mature firm not eligible for such incentives. The study accounts for all business taxes including corporate income taxes, property taxes, sales taxes, unemployment insurance taxes, capital stock taxes, inventory taxes, and gross receipts taxes.
All mature model firms in North Carolina, except the mature data center, experience below-average tax rates, the study says. New firms in North Carolina generally experience below-average effective tax rates as well.
Some key findings of the report include:
- A new corporate headquarters in North Carolina has very low income and property taxes, resulting in an effective rate of 7.1%, the lowest such rate in the country and 57% below the national median.
- North Carolina ranks third for the mature corporate headquarters with an effective rate of 10.4%.
- North Carolina’s low property taxes benefit the mature technology center, which experiences the fifth-lowest total effective rate for its firm type, as well as the mature distribution center, labor-intensive manufacturing operation, and shared services center, which all experience the fourth-lowest total effective rates for their firm types.
- The new research and development facility faces average sales and unemployment insurance tax rates in North Carolina, and property taxes are notably lower than in most states.
- Of all the firm types, data centers and new capital-intensive manufacturers experience the highest rates in North Carolina relative to other states.
About the Economic Development Partnership of North Carolina
The Economic Development Partnership of North Carolina (EDPNC) is a private nonprofit corporation that serves as North Carolina’s statewide economic development organization. The EDPNC, which operates under contract with the North Carolina Department of Commerce, focuses on business and job recruitment, existing industry support, international trade, tourism and film marketing. For more information, visit edpnc.com.
About the NC Chamber Foundation
The North Carolina Chamber Foundation works to promote the social welfare of North Carolina and its citizens by identifying, studying, researching, and analyzing, in a nonpartisan manner, the factors that enhance the business climate, workforce development, and quality of life of the state. This includes prospects for the creation and retention of jobs and educating the business community and general public by disseminating the knowledge gained as a result. North Carolina Vision 2030 – A Plan for Accelerating Job Growth and Securing North Carolina’s Future is coordinated by the North Carolina Chamber Foundation. The forward-thinking, initiative-driven plan provides focused economic development strategies around its Pillars of a Secure Future, which include Education and Talent Supply, Competitive Business Climate, and Infrastructure and Growth Leadership. For more information, visit ncchamber.com/foundation.