![]() ![]() Some states have much larger debt burdens than others. While states and localities do not have the ability like the federal government to use borrowing as a substitute to taxes for almost any kind of public spending, borrowing can still vary among the states. Let me conclude by discussing an alternative to taxes: borrowing. In these types of states, the reduced road funding from the state level allows gas tax rates to be more moderate. For the local share, property taxes are the major funding source. However, in many states the financial responsibility for paying for roads is more evenly split between state and local governments. Relatively few road projects are paid by county and city governments. In North Carolina, most road projects are financed at the state level, where the gas tax is the primary source of funding. It has to do with how roads are financed in a state. There is an easy explanation for the high level of North Carolina’s gas tax. However, in the Southeast, Florida and Georgia’s gas tax rate is higher than North Carolina’s. The state’s gas tax is 16th – highest among the 50 states. North Carolina has a relatively high gas tax rate per gallon compared to other states. One tax I haven’t mentioned yet, but which is a tax most of us pay once or several times per week, is the state gasoline tax. Supporters say the state’s low corporate income tax – especially compared to other states in the Southeast – is a major factor behind North Carolina’s excellent record in attracting businesses and jobs to the state. Critics say the current distribution favors corporations too much. This distribution of tax uses has created a long-standing debate in North Carolina over whether individual and household taxes from the individual income tax and sales tax are too high compared to the much lower corporate income tax. In particular, North Carolina’s collection of corporate income taxes is only half of the average state collection on a percentage basis. Facts and Figures follows five categories of taxes: individual income tax, corporate income tax, general sales tax, property tax and other taxes.Ĭompared to the averages for the other states, North Carolina collects relatively more of its total state and local taxes from the general sales tax and the individual income tax, and relatively less from the property, corporate income and other taxes. In addition to looking at the total tax picture, it’s informative to examine the specific kinds of taxes states use. In the immediate region, only Virginia has higher per capita and per income tax rates. Based on per capita and per income measures, North Carolina has higher taxes than the neighboring states of South Carolina, Tennessee, Georgia and Florida. It’s also important to compare North Carolina taxes to other states in the immediate region. Hence, North Carolina ranks near the lower one-third of states on the relative size of taxes. North Carolina ranks 32nd among all states for total state and local taxes per capita, and it ranks 31st for the percentage of total income taken by state and local taxes. Total taxes include taxes paid to the state government as well as taxes paid to all local governments in that state. The relative size of taxes in any state is captured by two measures: total taxes per capita (total taxes divided by population), and total taxes as a percentage of total income earned in the state. ![]() Let’s begin by looking at the big picture. Since it takes time to compile and publish government data, most of the information cited in the 2023 edition of Facts and Figures is from 2020, 2021 or 2022. Of course, my focus here will be on North Carolina’s taxes. But if you want to look at the taxes of states, and especially to compare both the level and types of taxes among states, then Facts and Figures is an indispensable resource. I realize that for non-economists, reading about taxes is not their best form of enjoyment. I think I heard my wife respond with, “Knock yourself out.” Instead, I was excited because the latest Facts and Figures from the Tax Foundation was just released. “Just for your information,” I quickly responded, “the Reds did win last night.” But that wasn’t why I shouted. “Did your Cincinnati Reds finally win a game?” My wife – who was born in New York – sometimes takes joy in reminding me how bad my hometown professional baseball team has performed in recent years. A couple of days ago my wife heard an enthusiastic “Yippee!” from my home office. ![]()
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