A STATE ON THE MOVE
How did North Carolina become a state that consistently ranks among the best states for business?
—By David Mildenburg
There’s no simple answer, but experts tend to credit a combination of many decisions dating back decades. An unquestionable factor was the wisdom of former Gov. Luther Hodges and others who pushed for creation of Research Triangle Park in 1959, which continues to pay dividends seven decades later.
More recently, many experts cite the founding of the 16-campus University of North Carolina System in 1971 and the continued development of the state’s 58 community colleges as instrumental in building an economic powerhouse. Meanwhile, fiscal policies have reduced tax burdens and enabled significant incentive programs that have prompted major investments by Toyota Motor, Wolfspeed, Siemens Mobility and many other corporations.
The results are obvious when independent observers compare the Tar Heel State with its 49 peers.
The CNBC business news channel has ranked North Carolina among its top two states for business over the past three years. That reflects top four ratings for economic conditions, business friendliness and workforce, along with strong showings for education and access to capital (both 10th of the 50 states) and technology/innovation (11th).
North Carolina also scored a solid B-plus grade for the cost of doing business, according to CNBC.
Digging a little deeper, the state’s economic outlook ranked fourth nationally, according to research by the American Legislative Exchange Council’s Center for State Fiscal reform. The nonpartisan group favors limited government and lower taxes, and bases its ranking on 15 policy variables that are influenced by state lawmakers’ decisions. No other Southern state ranked in the top 10, though seven were in the top 25.
North Carolina’s strong showing in the ALEC-Laffer State Economic Competitiveness Index stemmed from a low corporate income tax rate, property tax burden and minimum wage; (4th, 9th and 1st, respectively); low debt service as a share of tax revenue (13th); and the status as a right-to-work state (1st).
North Carolina’s top corporate tax rate is 2.5%, while the top individual income tax rate is 4.5%. The corporate tax is slated to be eliminated by 2030, unless lawmakers change policy.
The state’s economy is benefiting from nearly 670,000 people who have moved to North Carolina from other states between 2012-2023, which ranked fourth nationally, the ALEC-Laffer research shows. Overall non-farm payroll increased by 21% between 2012-22, which was 11th best, while the state’s gross domestic product showed the 14th best gain at 64% during the same decade. North Carolina is the ninth-most populous state with about 10.8 million residents as of mid-year.
North Carolina is among 16 states with a Triple-A credit rating from Standard & Poor’s, which enables lower borrowing costs. The state maintains a “Rainy Day Fund” that exceeded $4.7 billion earlier this year, along with about 30 other “budget reservation” funds that have been estimated to exceed $7 billion, according to the John Locke Foundation.
Another factor in North Carolina’s business success is recent tort reform, which has given the state “one of the best legal climates in the U.S.,” the Economic Development Partnership of North Carolina notes on its website. “When there’s less red tape and litigation, your business can reach new heights, faster.”
Then there’s energy costs: The average residential electric rate was about 13 cents per kilowatt hour as of January, compared with a national average of 15.45 cents, according to the U.S. Energy Information Administration. The state ranks third-lowest for water and sewage rates, the Economic Development Partnership of North Carolina notes.
Machelle Baker Sanders, who has been N.C. Commerce Secretary since 2021, says her vision for North Carolina is to “work with partners to attract better paying jobs, support small businesses and stimulate our state’s innovation and entrepreneurial economy.”
A lot of observers confirm that is happening in the Tar Heel State. ■