Former High Tax Capital Of The South Now Inspires Reform In No-Income-Tax States

It wasn’t long ago that North Carolina had the highest personal and corporate income tax rates in the entire southeastern United States. Prior to the 2013 tax reform act and subsequent improvements — which reduced and flattened North Carolina’s personal income tax rate while putting the corporate tax on the path to total repeal — lawmakers in other states would’ve never pointed to North Carolina as a model for competitive, pro-growth tax policy. But that’s all changed.

Not only are state lawmakers across the country now looking to North Carolina as a model for sound tax reform, even officials in no-income-tax states now point to it as motivation for providing further tax relief. Take Tennessee, one of the nation’s eight no-income-tax states, where legislators and Governor Bill Lee (R) enacted a new budget this year that provides significant tax relief to employers. It’s not lost on Tennessee lawmakers that their neighbors to the east, North Carolina, now boast the lowest corporate income tax rate in the nation and that it is scheduled to be entirely phased out by the end of 2030. As the business tax relief package that Governor Lee introduced in his State of the State address was under consideration in the Tennessee General Assembly, some Volunteer State lawmakers pointed to what is happening in North Carolina as a reason why it is imperative for Tennessee lawmakers to not rest on their laurels and to enact business tax relief this year.