NC No.4 in ALEC’s Economic Outlook Rankings

North Carolina is poised to be one of the nation’s top economies according to the ‘Rich States, Poor States’ report and rankings published by the American Legislative Exchange Council (ALEC). The 17th edition of the annual rankings placed the Tar Heel State as having the fourth best economic outlook among the 50 states, after turning in the eleventh ranked economic performance. It’s the latest in a string of encouraging recognition of North Carolina’s tax and economic policy reforms.

The ALEC-Laffer State Economic Competitiveness Index published by ALEC — America’s largest nonpartisan, voluntary membership organization of state legislators dedicated to the principles of limited government, free markets, and federalism — features an evaluation of each independent state and key areas of policy in that state to better understand its economic trajectory.

According to ALEC, the “Economic Outlook Ranking is a forecast based on a state’s current standing in 15 state policy variables. Each of these factors is influenced directly by state lawmakers through the legislative process. Generally speaking, states that spend less — especially on income transfer programs — and states that tax less — particularly on productive activities such as working or investing — experience higher growth rates than states that tax and spend more.”

Here, North Carolina ranks fourth in the nation, trailing only Utah, Idaho, and Arizona. Working in North Carolina’s favor, in addition to low personal and business tax burdens, is the fact the we are a ‘Right-to-Work’ state and do not burden citizens with an estate tax. Right-to-Work means workers enjoy the freedom to choose whether or not to join a labor union in the workplace, instead of being forced into one as a condition of employment. It also empowers business owners to manage their labor relationships without the threat of union bully tactics and protectionism.

While placing in the top five for five years in a row, North Carolina has slipped from the second place ranking of the last two years. Some of the variable inputs are scheduled for further improvement, however, such as personal and corporate income tax rates. Current law will see those rates continue to step down as revenue targets are met. Despite a long-dominant Republican majority, and at times super-majority, which in earlier years focused heavily on tax and regulatory reforms, North Carolina’s average tax burden is still relatively high.

When it comes to economic performance, North Carolina ranked 11 out of 50. According to ALEC, this is a “backward-looking measure based on a state’s performance on three important variables: State Gross Domestic Product, Absolute Domestic Migration and Non-Farm Payroll Employment — all of which are highly influenced by state policy.”

As readers can imagine, North Carolina ranked high in domestic migration. The Old North State has been a top destination for transplants from states like California, New York, and, closer to home, Virginia and South Carolina. Those trends will likely continue as policy reforms make North Carolina a better place to live, work, and grow.

The state legislative session is scheduled to convene later this month. The Republican majority will elect new leadership, and tax and spending policies will be eligible for further reform.

You can read the full report from ALEC here.