In late October the North Carolina Economic Development Board released its 2002 Economic Development Strategic Plan. The 57-page plan relies heavily on government-funded programs, but also draws attention to North Carolina’s high tax rates and overall tax burden.
The John Locke Foundation, in numerous opinion pieces and policy reports, has questioned the state’s competitiveness on the same tax issues.
The four general goals in the plan are: (1) Develop an outstanding education system and a highly qualified workforce; (2) Establish an aggressive and coordinated state agenda of investment in research, support for technology development and transfer, and effective use of university outreach; (3) Ensure a competitive environment for the recruitment and retention of business, capital investment and job creation; and (4) Foster attractive communities prepared for economic development success.
Under the third goal, one objective was to “develop and maintain North Carolina’s nationally superior business climate that consists of affordable business costs, fair regulation, and an equitable tax system.”
As a progress measure for that objective, the plan called for the state’s marginal income tax rates to be more in line with its competitors by 2005. Additionally, the state’s overall state-local tax burden would have to be competitive in the Southeast and remain below the national average.
This goal may prove difficult unless state leaders can reduce spending. North Carolina’s state and local taxes as a percentage of income in the region are second-highest only to Georgia’s, and are now close to the national average.
In addition to these high average tax rates, North Carolina has the highest marginal tax rates on income, investment, and capital gains in the region and among the highest in the United States. The state’s top income tax rate is 8.25 percent and the top corporate tax rate is 6.9 percent.
The board developed the plan around Gov. Mike Easley’s vision of “One North Carolina, where every citizen has an opportunity for a high quality of life, including a good job and a good education, regardless of where they live.”
The 37-member board is charged with developing and updating a plan by April 1 each year. The governor appoints the board chairman and 23 of the 37 members. Since the previous plan was released in July 1999 and never updated, the board has ignored the law for four consecutive years.
The 1999 plan contained some similar goals and also suggested a more competitive tax climate, but did not contain any specific measures.
The new plan and the previous plan can be found on the Internet at www.nccommerce.com/econbrd/plans.
Carrington is associate publisher of Carolina Journal.