This post appears here courtesy of the Carolina Journal
. The author of this post is Brayden Marsh
CNBC ranked North Carolina as the #1 state for business and economy in 2022. North Carolina has consistently been a top 10 contender and last year was the runner-up, but what caused the state to take the top spot?
"When Republicans won control of the General Assembly over a decade ago, we put North Carolina on a direct path toward becoming the best state in the country for business,"
Senate Leader Phil Berger (R-Rockingham) said. "From reforming our tax policy to creating some of the best incentives in the nation, North Carolina is a magnet for business creation and expansion."
The Republican General Assembly is seen as the reason for economic growth by business owners as well.
"To me the main reason is that we've had a conservative general assembly since 2010,"
says Bob Luddy, CEO of CaptiveAire. "The PIT (personal income tax) was reduced from 7.75% to 4.99% and it's going to go down further in years to come. Corporate went from 6.9% to 2.5% and is heading to zero."
"Treasurer Folwell paid off the unemployment insurance debt to the federal government. New York and California chose not to pay theirs off even though they had all the money to do it which means the federal government will raise the tax on businesses until it's paid off,"
continued Luddy, "Many good financial decisions, big improvements in educational opportunities, containment of regulation, so all the way around the general assembly over the last 12 years has done amazing things."
CNBC attributes North Carolina's success to bipartisan incentive negotiations that make the state more attractive to incoming companies and manufacturers, but bipartisanship isn't a new concept in North Carolina.
"CNBC oversells the 'political collaboration' angle,"
says Mitch Kokai, senior analyst for the John Locke Foundation, "It cites the willingness of Gov. Cooper and legislative leaders to reach agreements on targeted tax incentives for major economic development projects. But that type of cooperation always has existed across party lines in North Carolina."
The $2 billion deal to open a VinFast electric vehicle factory is the highlight of the bipartisan efforts in CNBC's article. The article says that as Gov. Roy Cooper signed the deal that Speaker Tim Moore and Senator Phil Berger were "close at hand." This deal can create upwards of 7,500 to 13,000 when construction is completed on its 2000 acre plot in 2024, but some believe the government shouldn't choose what companies thrive.
"That bipartisan support has disappointed free-market groups like the John Locke Foundation,"
says Kokai, "We believe these targeted giveaways represent bad public policy."
Although targeted tax incentive deals can bring big manufacturers like Apple's $846 million incentive deal to bring a campus to the triangle area, free-market groups don't want the government selecting what companies get incentives.
"Any special incentives are bad long term,"
says Luddy, "It was noted that the governor stated that they had a scientific way of determining the future. The idea that the governor's office could pick out the future industrial leaders is paramount to fraud. They're very unfair to taxpayers and to the businesses that operate in the state."
"The CNBC story seems to suggest that North Carolina's continued strong performance will depend on future political collaboration. That's true only to the extent that the political actors unite around ideas that are good for all businesses, not just a select few,"
says Kokai, "The bottom line is that North Carolina has placed itself in position to contend for the honor of being the top state for business because of a decade of tax and regulatory reforms, along with worthwhile changes in transportation and education policy."
Instead of focusing on the bipartisan efforts in the general assembly, analysts believe the economic success should be attributed to the economic reforms in North Carolina.
"Personal income tax rates are dropping again, and the corporate rate is set on a path to disappear,"
says Kokai, "Those changes make much more difference than the fact that the governor and legislative leaders are willing to sing Kumbaya."