RALEIGH – In describing North Carolina’s fiscal and economic performance, it’s important to avoid the extremes.

Please don’t misunderstand me. I’m still of the school that extremism in the defense of liberty is no vice. What I mean is that politicians and pundits should avoid the temptation to oversell their rhetorical points. On most measures, North Carolina is neither the best nor the worst. We’re mediocre. We’re the mushy center. We’re nougat.

Now, it certainly is true that North Carolina has one of the highest unemployment rates in the United States. More generally, it can fairly be said that North Carolina has one of the nation’s worst-performing economies at the present time. But that doesn’t mean our economy has been perpetually in the cellar.

In the latest edition of their book Rich States, Poor States, co-authors Art Laffer, Steve Moore, and Jonathan Williams create two rankings of the states – one in economic performance over the past decade and the other in “economic outlook” for the future based on a variety of state policy variables. North Carolina comes in close to the middle in both rankings.

For the 1997-2007 time period, Laffer, Moore, and Williams zero in on three measures of economic momentum: 1) the rate of domestic in-migration, 2) change in per-capita income, and 3) job creation. North Carolina has certainly been an attractive place to move. We ranked 5th in the country in in-migration during this period (emigration from abroad is accounted for separately). But our income trend was atrocious, 46th in the nation, while our employment trend was close to the average, 21st in the nation.

Simply put, North Carolina didn’t have nearly as bad an economic ride as the likes of Michigan or Ohio did over the past decade. On the other hand, contrary to all the hoopla and chamber-of-commerce boosterism, North Carolina hasn’t been an economic pacesetter in recent years, either. The best-performing state economies have been Texas, Florida, Virginia, Washington, and several other Western and Southwestern states.

Turning from the past to the future, the co-authors rank North Carolina 21st in economic outlook, based on 15 policy variables with a demonstrable effect on state economic growth. On some measures, North Carolina is relatively well-positioned to be competitive. For example:

• We have the lowest unionization rate and government wage floor in the country (although the General Assembly seems intent on removing North Carolina’s advantages here).
• We have less debt as a percentage of tax revenue than most states do.
• North Carolina’s property-tax burden remains 12th lowest in the country.

However, on other measures North Carolina is poorly positioned for future growth:

• We rank much worse than average in income tax burden and in the size of government bureaucracy.
• We are among the worst in the country in the tax treatment of inherited estates.
• North Carolina is a little worse than average in workers’ compensation costs.

On a separate measure of the cost of government, North Carolina also shows up as about average for the nation and worse than average among Southern states. The Washington-based Tax Foundation releases annual tax-burden estimates. At 9.8 percent of personal income, North Carolina’s state & local tax burden ranked 20th in the nation and 3rd in the South in 2008.

The Tax Foundation also computes Tax Freedom Day, which is simply a way to describe the total tax burden in each state – federal, state, and local taxes combined – divided by total personal income. For 2009, North Carolina’s Tax Freedom Day is Thursday, April 9.

Putting us smack dab in the middle of the states at 25th. Just another bit of fiscal nougat to chew as you watch the legislative debate unfold.

Hood is president of the John Locke Foundation