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North Carolina Tax Reform Options: A Guide to Fair, Simple, Pro-Growth Reform

North Carolina Tax Reform Options: A Guide to Fair, Simple, Pro-Growth Reform

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Published by Tax Foundation
Commissioned by the Carolina Business Coalition and authored by the Tax Foundation, we hope this book provides useful information and observations for North Carolina policymakers, journalists, and citizens as they evaluate their state's tax system.
Commissioned by the Carolina Business Coalition and authored by the Tax Foundation, we hope this book provides useful information and observations for North Carolina policymakers, journalists, and citizens as they evaluate their state's tax system.

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Published by: Tax Foundation on Jan 28, 2013
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11/02/2013

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North Carolina Tax Reform Options:
A Guide to Fair, Simple, Pro-Growth Reform
January 2013
Joseph Henchman & Scott Drenkard
 
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i
TABLE OF CONTENTS
TABLE OF CONTENTS .................................................................................................................... iEXECUTIVE SUMMARY ................................................................................................................... 1PRINCIPLES OF GOOD TAX POLICY ........................................................................................ 9GUIDELINES FOR SUCCESSFUL TAX REFORM ....................................................................10NORTH CAROLINA’S EVOLVING ECONOMY ...................................................................11I
NCOME
............................................................................................................................................12G
ROSS
S
TATE
P
RODUCT
................................................................................................................14U
NEMPLOYMENT
.............................................................................................................................14M
ANUFACTURING
...........................................................................................................................16S
ERVICES
...........................................................................................................................................18I
NTERSTATE
M
IGRATION
................................................................................................................20NORTH CAROLINA’S EXISTING TAX SYSTEM....................................................................21SOURCES OF REVENUE ...........................................................................................................22STATE-LOCAL
 
TAX
 
BURDEN ................................................................................................24STATE
 
BUSINESS
 
TAX
 
CLIMATE ............................................................................................26CORPORATE
 
INCOME
 
TAX ...................................................................................................28H
IGH
R
ATE
,
 
N
ARROW
B
ASE
.....................................................................................................28N
ET
E
CONOMIC
L
OSS
&
 
C
ARRYFORWARD
.............................................................................29A
PPORTIONMENT
F
ORMULAS
,
 
C
OMBINED
R
EPORTING
,
 
&
 
T
HROWBACK
R
ULES
................30E
CONOMIC
D
EVELOPMENT
I
NCENTIVES
..................................................................................31FRANCHISE
 
TAX ........................................................................................................................32INDIVIDUAL
 
INCOME
 
TAX ....................................................................................................33SALES
 
TAX ....................................................................................................................................35S
ALES
T
AX
A
PPLIES TO
B
USINESS
I
NPUTS
,
 
D
ISTORTING
M
ARKET
..........................................36I
DENTICAL
S
TATE
&
 
L
OCAL
S
ALES
T
AX
B
ASE
..........................................................................37S
ALES
T
AX
D
OES
N
OT
A
PPLY TO
S
ERVICES
,
AT
E
XPENSE OF
G
OODS
I
NDUSTRY
................38PROPERTY
 
TAXES ......................................................................................................................40TRANSPORTATION
 
TAXES
 
&
 
FEES ......................................................................................42TAX
 
ADMINISTRATION ..........................................................................................................44DEBT,
 
LIABILITIES,
 
&
 
CREDIT
 
RATING ................................................................................46KEY PREVIOUS NORTH CAROLINA TAX REFORM EFFORTS AND PROPOSALS ..471921:
 
R
EVENUE
A
CT OF
1921 .......................................................................................................471933:
 
E
MERGENCY
R
EVENUE
A
CT OF
1933 .................................................................................471951:
 
T
HE
S
ALES
T
AX
:
 
I
TS
H
ISTORY
,
 
G
ROWTH
,
 
D
EVELOPMENT
,
 
P
ROBLEMS
,
AND
P
OSSIBILITIES
....................................................................................................................................47

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