In Fiscal Year (FY) 2016, North Carolina collected $39.5 billion in state and local taxes—or $3,890 for every man, woman, and child. While this is an impressive sum of money, it tells us little about whether or not the average North Carolina taxpayer can afford this level of taxation?
To better answer this question, this analysis will calculate North Carolina’s tax burden relative to the private sector. Ultimately, it is the private sector that creates new wealth and income. A high tax burden means a state is hobbling its private sector relative to other states and reducing their long-run economic growth potential.
As shown in Chart 1, North Carolina’s state and local tax burden (tax collections divided by private sector personal income) was the twenty-fifth highest in the nation for FY 2016 at 14.1 percent—or -1 percent below the national average of 14.3 percent.
#NorthCarolina state and local #taxburden in FY 2016 was the 25th highest in the nation at 14.1%— -1% below US average of 14.3% http://bit.ly/2FX9C8F @keypolicydata #NCpol #NCleg #NCsen #NCgov #PolicyData (click to tweet)
As shown in Chart 2, North Carolina’s tax burden has increased over time by 63 percent to 14.1 percent in FY 2016 from 8.6 percent in FY 1950.
#NorthCarolina state and local #taxburden has increased 63% between FY 1950 (8.6%) to 2016 (14.1%) http://bit.ly/2FX9C8F @keypolicydata #NCpol #NCleg #NCsen #NCgov #PolicyData (click to tweet)
To put North Carolina’s tax burden into perspective, let’s compare it to size of major industries in the state (as a percent of private sector income). As shown in Chart 3, North Carolina’s 14.9 percent tax burden is greater than these combined industries: retail trade (6.7 percent), wholesale trade (5.9 percent), and utilities (0.7 percent).
#NorthCarolina state and local #taxburden > retail, wholesale, and utilities http://bit.ly/2FX9C8F @keypolicydata #NCpol #NCleg #NCsen #NCgov #PolicyData (click to tweet)
North Carolina’s lower than average state and local tax burden is driven by a low property tax burden (3.5 percent, 13th lowest), but is partially offset by a high individual income tax burden (4.3 percent, 10th highest).
Of course, the tax burdens for local government can vary just as much as they do among the 50 states. As such, we have also calculated the local government tax burden for every county in North Carolina—this includes every taxing jurisdiction within the geographic county borders whether it is a city, a special district, or county government itself.
The 20 North Carolina counties with the highest local government tax burden include:
The 20 North Carolina counties with the lowest local government tax burden include:
Finally, don’t forget to watch our exclusive time-lapse video of state and local tax burdens over the last 66 years! See if your state has been above or below the national average?
Scott has nearly 20 years of experience as a public policy economist. He is the author, co-author and editor of over 180 studies and books. His professional experience also includes positions at the American Conservative Union Foundation, Granite Institute, Federalism In Action, Maine Heritage Policy Center, Tax Foundation, and Heritage Foundation.