Christmas was almost a week ago but residents of the ninth most populous state in the U.S., North Carolina, will get another present this New Year’s Day, which is when the new and reduced state income tax rates – both personal and corporate – take effect.
When the clock strikes midnight to mark the start of 2019 on the east coast, North Carolina’s personal income tax rate of 5.499% will drop to 5.25%. The state’s 3% corporate tax will decline to 2.5%. This latest round of state tax relief, enacted as part of the budget approved in 2017 by the Republican-controlled North Carolina General Assembly, takes effect one year after a vast majority of North Carolinians received a federal income tax cut from the Tax Cuts & Jobs Act.
This latest reduction in North Carolina’s income tax rate comes at a time when the Census Bureau’s new population figures, which show Americans continuing to move from high to lower tax states, are generating national headlines.
What North Carolina has accomplished over the past five years should give hope to those who live in states with uncompetitive and growth-depressing tax codes. Before North Carolina lawmakers enacted their landmark 2013 tax reform, the Tar Heel State had the highest personal and corporate income tax rates in the region. Today, except for the no income tax states of Tennessee and Florida, North Carolina now has the lowest personal income tax rate in the southeastern U.S. and the lowest corporate tax rate in the nation among the 48 states that impose such a levy on businesses.