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17:57 15 April in Article

Legislative reforms of 2013 have distinguished North Carolina as being one of the “biggest winners in economic outlook for 2014.” The American Legislative Exchange Council (ALEC) will be releasing its 7th edition of Rich States, Poor States report during a press conference with North Carolina’s Governor Pat McCrory on Tuesday, April 15.

Jumping from a ranking of 22 out of 50 states in 2013 to number 6 in 2014, puts North Carolina into the top ten for the first time since ALEC’s economic outlook reports began in 2008.

According to Jonathan Williams, Senior Director of Tax and Fiscal Policy for ALEC, our state’s tax reform is “the most significant ALEC’s seen in the last decade…It’s very rare to take a progressive tax and change it to a flat tax,” which he calls a very good move.

The Rich States, Poor States survey is significant because “it shows states that value competitiveness and economic freedom,” said Williams. The report utilizes 15 criteria to calculate its rankings including personal, corporate and sales tax rates, minimum wage, worker’s compensation costs and whether it’s a right to work state.

Tax reforms passed by a majority Republican legislature in 2013 were:

  • Reduced the personal income tax rate. In 2014, the rate will be reduced from  from 7.75% to 5.8% (moved from 36 to 25).
  • Reformed the income tax structure from a progressive system to a flat tax (moved from 31 to 19).
  • Reduced the corporate income tax from 6.9% to 6% (moved from 22 to 14).
  • Eliminated the death tax.


According to the Heartland Institute publication “Ten Principles for Improved Business Climates,” there have been numerous studies comparing the tax structures from state to state, and economists invariably arrive at certain conclusions:

High or rising taxes are associated with lower amounts of economic growth [Richard Vedder, professor of economics at Ohio University, 2001]

In a study of all 50 states from 1994 to 2004, low-tax states had population growth rates nearly three times greater than high-tax states…personal income growth 32% greater…and employment growth 78% greater. [J. Scott Moody, Maine Heritage Policy Center, 2006]

Population growth or “in-migration” is another factor that results from a healthy economy. North Carolina’s in-migration is third highest in the nation with a 642,378 increase from the years 2003 to 2012, just behind Texas and Florida.

Rich states poor states 2014

Other findings from the report:

  • States with lower taxes and fiscally responsible policies experience far more economic growth, job creation, and domestic in-migration than their high-tax, big government counterparts.
  • States are looking to become more competitive and embrace the policies that have been proven to lead to economic prosperity. Last year, 17 states substantially cut taxes, with Indiana, North Carolina, and Michigan leading the charge to vastly improve their overall economic outlooks.
  • California, Illinois, and New York—once economic powerhouses—continue their long slides into deeper economic malaise. While levels of economic output for these states remain high, rates of economic growth are falling behind states like Texas, North Carolina, and Utah.


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