NC and the State Tax Rankings

On October 28, 2014 the Tax Foundation released its 2015 State Business Tax Climate Index and North Carolina was #16 among the ranked 50 states. The Tax Foundation is a nonpartisan tax research group that collects and publishes tax research for both Federal and state. While #16 may not seem like something to cheer about, North Carolina was ranked top 10 worst business tax climates in 2014 at #44. Also, there are states that do not have individual, corporate, or sales tax like we do. These states that do not have corporate or individual income tax (Wyoming, Nevada, and South Dakota) automatically vault to the top of the list.

The North Carolina tax reform left many with mixed emotions since it cut the $50,000 business income deduction per business owner that our small to medium sized business clients benefited from. However, it is hard to ignore that a jump in the rankings makes our state a lot more attractive when compared to surrounding coastal states. This ranking will also climb when the next income tax rate reductions are put into effect in 2015. As a reminder here are the tax rates changes that have resulted in North Carolina’s jump in the business tax climate rankings:

Individual Income Tax Rates:

2013 – Ranged from 6% to 7.75%

2014 – 5.8%

2015 – 5.75%

Corporate Income Tax Rates:

2013 – 6.9%

2014 – 6%

2015 – 5%