North Carolina can serve as a “bellwether model” for how tax reform can lead to economic growth
A state model for federal tax relief
Tax cuts in North Carolina have revved up the economy
By Robin Hayes
As our congressional Republicans begin to shape their tax relief for hardworking Americans, they need not look any further than North Carolina. In the years after rolling out a bold tax relief plan that helps nearly all North Carolinians, the Old North State has become a bellwether model of how to cut taxes.
In 2010 North Carolina Republicans captured both chambers of the General Assembly for the first time in more than 100 years with the promise of Democratic tax hike rollbacks. Standing up to the Democratic governor, a hostile media, misleading liberal think tanks, and facing a monumentally reckless budget hole, Republicans held firm and the tax hikes were eliminated, one of which was a regressive one-cent sales tax. Already facing a massive budget deficit due to Democrat-authorized overspending and failure to act in the midst of the Great Recession, Republicans held true to their conservative principles by right-sizing government and never ceasing on their mission of further tax relief and reform.
In 2011, following decades of Democratic governance in North Carolina, we had the highest tax rates in the Southeast. Republicans modernized the state’s 1930s Depression-era tax code, further cut personal income tax rates, slashed business taxes, eliminated the death tax, and ended dozens of loopholes for special interests. The reforms made our economy competitive, and immediately moved North Carolina from the bottom of national rankings to the 17th-best business climate in America, according to the respected Tax Foundation.
As the White House pushes Congress to pass new legislation aimed at tax relief, I draw hope from experience. I remember what it was like for North Carolina’s families and businesses about 10 years ago, and compared to now, every single income tax group is keeping more of their hard-earned money. Republicans saw a problem and instead of creating even more tax hikes to fund unnecessary programs, they cut the problem off at its source. Reforms were enacted by the legislature to get rid of special tax loopholes, and in 2013 the General Assembly again passed a historic tax reform that significantly reduced the personal income tax rate. Nearly every year since then, Republicans have worked to curtail the tax burden even further for all income categories. This year alone, North Carolinians will be keeping more than $3 billion compared to 2010.
Along with burdensome income tax rates, the business climate of North Carolina left little incentive for companies and small businesses to stay at home, which also contributed to the unemployment rate. As a businessman, I can tell you firsthand just how much corporate tax rates and legislation can make or break a business. Since then, North Carolina has enacted major business tax reforms that have helped create more than a half-million new jobs since 2011. We’ve dramatically lowered the corporate income tax rate from 6.9 percent in 2011 to just 2.5 percent for 2019 — the nation’s lowest among states with a corporate tax. We’ve also simplified and reduced the franchise tax on small businesses, cutting what is effectively a statewide property tax on them. Our state has taken every opportunity to help individuals and businesses get out from under crushing tax regulations, and I, for one, am extremely proud of where we are today.
Examining our state’s economic standing today is no longer an ill-conceived task. Before Republicans began their decade-long effort on tax relief and reform, North Carolina had the highest unemployment in the region. The Democratic governor furloughed teachers, and taxes were through to roof. At 4.1 percent, North Carolina’s unemployment rate is at a 17-year low. Republicans passed the largest teacher pay raises in the state’s history. Deficits have turned to surpluses, and investment in education has led to the best high school graduation rates in North Carolina’s history.
Our people are saving more, the state is saving more, and we are investing more in education, infrastructure and public safety. With a Republican in the White House, we’re looking forward to nothing but continued growth. If there’s one thing I’ve learned, it’s that tax reform is a long journey. It doesn’t happen all at once, but it’s something that can benefit every one of our citizens if done properly. Make no mistake — tax reform works, and North Carolina is a prime example. These reforms are boosting our state’s climate for job creation, driving down unemployment, and returning more money to the families and small businesses that earned it. If Washington needs any more convincing, North Carolina has a lot to show you.
• Robin Hayes is chairman of the North Carolina Republican Party.
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