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North Carolina’s tax climate

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The Tax Foundation, a nonpartisan group, recently ranked North Carolina tenth worst in the nation on taxes! N.C. Cooperative Extension economist Mike Walden explains what the group didn’t like about our state’s taxes.

“Well what the Tax Foundation does — and they do this every year … — is they go through all the taxes that each state uses, and they look at the relative comparison between states. North Carolina got low marks because of our high reliance on the income tax, and we have fairly high income-tax rates.

“We also got low marks for our sales tax — both the general sales tax, plus our gasoline tax, which is high. The state was about average, so we didn’t get docked on our corporate income tax, on our property tax, and we were very low indeed — we were the sixth lowest state — in terms of our unemployment insurance tax.

“Now my analysis of this is, I think the state getting bad marks for our high gasoline tax is a little misleading because in states where they have a low gas tax usually what happens is the state merely passes on to local governments the responsibility for building those roads, which results in a higher local property tax.

“But I think the key finding here is that it does pinpoint that we may not be competitive just in terms of taxes and using our taxes to attract businesses. We may not be competitive in terms of our individual income tax with our relatively high rates. That’s actually something that state leaders have known for a while; of course, it’s another issue of whether and how to change that.”

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