RALEIGH, N.C. (WNCN) — You’re probably getting ready to pay your income taxes.
In a few years, corporations in North Carolina won’t have to pay any of them.
A provision in the $25.9 billion state budget signed by Gov. Roy Cooper in November includes a steady decline in what was already one of the lowest corporate income tax rates in the nation — all the way to 0 percent.
And an expert on taxes from North Carolina State University says we’re not talking nearly enough about what that means.
“One thing that seems to get overshadowed in all this is that we fundamentally change the way that we’re going to be taxing corporations” in the state, said Nathan Goldman, an assistant professor of accounting at N.C. State’s Poole College of Management.
The budget drops the corporate income tax from the current rate of 2.5 percent to 2 percent in 2026, then by another point two years later. By 2030, it disappears entirely — making North Carolina one of the few states with no such tax.
“That doesn’t mean that they’re not going to pay any taxes at all,” Goldman said. “It just means that … the income that they have in North Carolina is not going to be taxed.”
It will make the state among the most competitive for corporations.
But wasn’t it already?
Forbes magazine three years ago ranked North Carolina as the best state for business. And the situation was attractive enough for tech giants Google and Apple to announce plans to bring campuses to the Triangle in the coming years — and for Boom Supersonic to pick the the Piedmont Triad earlier this week for a factory where it will build supersonic jets.
“Businesses are going to want to now come to North Carolina even more so than they did before,” Goldman said.
The Tax Foundation, a fiscally conservative think tank based in Washington, estimates that North Carolina will move to No. 1 in the nation in corporate tax collections and No. 5 overall, Goldman said.
But just how much money will the state wind up missing out on?
Goldman says that 2.5 percent rate typically works out to about $1.5 billion a year — or, 5 percent of the state’s total tax collections.
Not an insignificant number, certainly, but one that is sure to be dwarfed by some other figures.
“When a corporation like Apple brings 3,000 employees to the Triangle, we collect far more in taxes from those 3,000 employees than we do from Apple’s North Carolina state tax revenues,” Goldman said.
Yet it does raise some questions about whether further cuts will lead to diminishing returns.
“We’ve seen a lot of businesses come to North Carolina. We probably will not see that exact same boost that we had before going from 2.5 (percent) to 0,” Goldman said. “Although I suspect we’re going to continue growing at quite an exponential rate.”
And what if companies move here to take advantage of the tax rate — but allow their employees to work remotely from other states, meaning North Carolina would miss out on their personal income taxes?
“We’re seeing more remote working. We’re seeing more companies adapt to not having people in the office quite as much,” Goldman said. “So people can question whether this is going to have the same benefit.”