Will NC's New Business Tax Rate Equal New Business?
North Carolina Gov. Pat McCrory signed major tax reform legislation into law this week, keeping one of his most ardent campaign promises.
The governor and his conservative Republican base have consistently said North Carolina would be better able to attract business to the state with lower taxes.
But experts say the formula needed to build and grow businesses is a lot more complex than taxes and some hope the new tax structure doesn’t hurt the state’s already celebrated business climate.
North Carolina politicians and economic developers have been working overtime during these past few years to sell the state as a place that’s always open for business.
“There’s a reason why North Carolina has consistently been ranked the United States best business climate. It’s where businesses thrive," a voice booms from a state Commerce Department video.
This video was released in 2010, a part of the Commerce Department’s “Thrive in North Carolina” campaign.
“In today’s global economy, people are the most important asset to any company and North Carolina gives them what they need to flourish. We don’t have just one thing. We have it all," the voice says.
Crystal Morphis is Founder and CEO of Creative Economic Development Consulting based in Elkin.
“Companies number-one concern is finding qualified talent," said Morphis.
One of the recent big site selection projects Morphis worked on was the new Sheetz distribution and production center in Burlington. The convenience store chain broke ground this month on the $32.8 million project.
“When the executives spoke at the ground breaking, some things that they cited as very important in their location decision, one was the ability to find qualified workers in the community," said Morphis.
Morphis says they also cited the working relationship between local, regional and state economic developers. She says all parts make up the puzzle.
“But I think leaders need to keep in mind again, that just lowering the tax rate does not mean that they can cut back on key investments in workforce development, in transportation improvements and incentive programs," said Morphis.
The sweeping new tax law, cuts the corporate tax rate from 6.9% to 6% in 2014 and 5% in 2015. Aaron Chatterji is a Strategy Professor at Duke’s Fuqua School of Business. He agrees there have to be trade-offs that work for everyone.
“A small reduction of less than two percent in the corporate tax rate, is that going to really shift a business leader’s decision to move from one state to another, especially if it hits revenue down the road for the state. So we can’t support these great schools that the business leader’s kids are going to go to or the roads that all of her employees are going to be driving to and from work everyday," said Chatterji.
Governor Pat McCrory says he knows there is no one step to job creation, but he said during this week’s bill signing, tax reform is a first step.
“I’m proud that this is not only going to help individuals and individual families but this is going to help recruit new businesses. We stated this when we made the announcement. The Secretary of Commerce said this is going to be a major difference in trying to compete, not just against our neighboring states but against the world," said McCrory.
North Carolina has been praised and celebrated on list after list for its business-friendly atmosphere; number one for its Business Climate by Site Selection Magazine last year and number two Best Business Costs by Forbes.
“There’s a reason that people are moving to North Carolina at twice the national average. It’s where people thrive. Less drive time, more family time," the voice says in the video.
And the next one of these videos will surely play up the lower tax rate.