A decade ago, far too many North Carolinians were struggling to find work and pay their bills. If you’ve ever struggled to find employment, you know that the emotional toll of being unemployed or living in poverty can be excruciating.
Thankfully, after a generation of reckless and unsustainable spending binges, the 2010 elections ushered in a Republican majority to North Carolina’s state legislature, the first time that such a balance of power had occurred in the state since 1870. As a result, North Carolina’s economic health has made incredible strides. More North Carolinians are working and earning larger paychecks. Households are keeping more of their own money, both in their paychecks and at the cash register.
Tax reforms have made the state much friendlier to job-creators, resulting in far more robust economic gains than the previous 10 years under progressive leadership.
In 2010 North Carolina was home to one of the worst business tax climates in the nation. The state ranked a lowly 39th and imposed the highest personal income and corporate tax rates in the Southeast.
North Carolina workers suffered the most under this high tax regime.
In the ten years leading up to 2010, job growth in the state was actually negative. From 2001 to 2010, the number of employed North Carolinians declined by 1.25 percent, only slightly better than the national decrease of 1.4 percent.
By the end of that decade, the unemployment rate in North Carolina was a full percentage point above the national average, and at 10.6 percent was the 8th highest rate in the nation. Income growth suffered as well, as North Carolina fell further behind the national median household income.
Fortunately, tax relief soon followed the transition to conservative leadership in the state legislature on the tail of the 2010 elections.
Overriding then-Governor Bev Perdue’s veto, the legislature approved a 17 percent reduction in the state sales tax rate (from 5.5 to 4.5 percent) in the summer of 2011, saving North Carolinians an estimated $1.1 billion per year. And because the sales tax is regressive — a tax that negatively impacts the poor more than the wealthy — this tax cut offered relief particularly beneficial to the state’s low-income households.
This tax relief was followed in 2013 by historic tax reforms, with more improvements passed in the years since. North Carolina went from having the highest personal and corporate income tax rates in the Southeast to the lowest.
Moreover, a larger standard deduction exempts more low-income workers from having any state tax liability at all. “More than 1.5 million working families in North Carolina owe no income tax on their earnings now that the state’s standard deduction has tripled,” reported House Speaker Tim Moore’s office in April 2019.
The sustained and significant income tax cuts mean that workers get to keep more of what they’ve earned, making it easier to make ends meet.
As a result of the 2013 reforms, along with the subsequent improvements, North Carolina was transformed from one of the worst states to do business to one of the best. At the time of the 2013 reforms, the Tar Heel state was burdened with the 7th worst state business tax climate in the nation, according to the Tax Foundation. Immediately after the reforms, North Carolina’s ranking shot up to 17th best. Continued tax cuts have boosted our state to 15th best in 2020.
Creating a more hospitable climate for job creators has resulted in more jobs and bigger paychecks for North Carolinians.
From January 2011 to December 2019, North Carolina’s economy has added more than 711,000 jobs, good for a job growth rate of 18.3 percent. North Carolina outpaced the national average rate of 16.5 percent.
This rate of job growth even outpaced state job growth in the booming decade prior to 2009’s Great Recession, which saw North Carolina jobs grow at a clip of 12.3 percent.
Household income is also up since the historic 2013 tax reforms, exceeding regional and national average growth rates since 2013 and no longer falling behind national averages like under previous leadership.
That means the median household in Mecklenburg County, for instance, now has roughly $10,000 more per year to pay bills and take care of financial needs. Economic security is within reach of more North Carolina families.
More needs to be done, to be sure, but no longer are we living in the dark days of high taxes, high unemployment and low growth. With a commitment to continue disciplined spending and market-oriented tax reform, the next decade stands to be even brighter than the last.
Brian Balfour is executive vice president of Civitas Institute, a free-market public policy organization in Raleigh, NC.