Durham Reporter

The recently unveiled biennial state budget agreement in North Carolina introduces income tax relief, universal school choice, and additional protections for taxpayers. The budget agreement, negotiated between leaders of the North Carolina House and Senate, is designed to potentially enable households and small businesses to retain a greater portion of their earnings, stated on Sept. 20.

"NC will entirely eliminate its corporate income tax", was declared as part of the budget agreement.

After securing majorities in both the General Assembly in 2010, Republican lawmakers have embarked on a series of tax system reforms in North Carolina. According to the Carolina Journal, these reforms encompass broadening state tax bases, reducing tax rates, decreasing or eradicating special interest incentives, and simplifying the tax code. This has resulted in almost all North Carolinians retaining more of their earnings for personal use. The state has now become an attractive destination for employment, residence, investment and job creation.

Insights from a recent assessment by the non-profit Tax Foundation on North Carolina's tax climate reveal considerable progress according to another article by the Carolina Journal. Prior to 2010, our tax system was consistently rated as one of the least favorable in the South for investment and economic growth by the Tax Foundation. It fell significantly below national average but by 2014 it had made significant improvements following sales and income taxes reductions led by conservative legislators.

The current budget agreement intends to speed up ongoing reductions of state's personal income tax rate as reported by Forbes. The rate dropped from 4.99% to 4.75% early in 2023 and under this new budget it could reach 3.99% at end of 2025 - one year ahead than planned initially.
The budget also introduced annual revenue triggers over next ten years that could potentially reduce North Carolina's income tax rate down to as low as 2.49%. If this level is achieved it would make North Carolina home to the lowest flat income tax in nation, surpassing Arizona currently holding this distinction with a 2.5% rate. Additionally, North Carolina's corporate income tax - already lowest in country at 2.25%, is scheduled for a full phaseout by end of decade following the last budget signed into law by Governor Roy Cooper in Nov. 2021.