RALEIGH, N.C. (WNCN) — North Carolina now expects an extra $6.5 billion in tax revenue over the next two years and corporate tax expert Nathan Goldman says the state has two viable options for it — spend more, or tax less.
A third option — furthering the budget stalemate between lawmakers and Gov. Roy Cooper that has lingered since 2019 — would be “unacceptable,” Goldman said.
“Things are looking eerily similar to what we saw two years ago, when we did not pass a budget,” said Goldman, an assistant professor of accounting at North Carolina State University. “If we don’t pass a budget this year, we will continue to revert back to those 2018 numbers. … And we’ll continue to have budget surpluses in greater amounts as that continues forward, and that’s really just unacceptable at this point.”
State economists revised their forecast for collections last week, and now the question going forward — what should the state do with it?
“We need to find ways to respond to our citizens to either return some of this money back to them by lowering taxes, or find a way to spend it and help provide greater infrastructure to our state,” Goldman said.
“We need to make sure we’re targeting the right areas,” he added.
One aspect of the plan that passed the state Senate last week would phase out the corporate tax rate, eliminating it entirely by 2028.
But Goldman points to companies like Apple and Google coming to the state — the tech giants this spring announced plans to open hubs in the Triangle — as evidence that North Carolina’s corporate taxes are already so low that they aren’t an impediment to other businesses looking to relocate here.
The nonpartisan Tax Foundation says North Carolina’s flat corporate tax rate of 2.5 percent is the lowest among the 44 states that have such a tax.
Apple is getting the largest set of tax breaks in state history, with $846 million in incentives over 39 years that Goldman and another N.C. State researcher say in a study could pay for itself in as little as four years.
“We are not struggling to bring in new businesses right now,” Goldman said. “In fact, we’re doing a great job bringing in new businesses. … We’re seeing all sorts of businesses come into North Carolina. Does that mean we need to lower our corporate taxes? Probably not. We’re probably doing OK there.”
Another study by Goldman found states like North Carolina that had relatively tight COVID-19 restrictions tended to bring in more tax revenue.
“It’s important that whenever we’re faced with these excessive tax revenues, we must consider whether we are collecting the proper amount,” Goldman said. “It does mean that we may be collecting too much in taxes, and we could look for opportunities to lower that tax burden where it’s appropriate, where it’s equitable.”
He says there could be other ways “to lower our tax burdens for residents to help address … different needs for our citizens,” he said.