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Fourth in outlook, 11th in performance, North Carolina remains a best bet

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(The Center Square) – Fourth in the country in economic outlook and 11th in performance, North Carolina’s recent history of scoring well in business analytics continued Tuesday when the 17th edition of Rich States, Poor States was released.

Among the 15 variables the report used to generate the economic outlook, the state was first or tied for first three times, had a fourth and a ninth, and no category worse than 31st. The outlook ranking is down two spots, the performance ranking a tick back from the previous year’s 10th, and North Carolina is one of only six states to make top 11 in each.

The comparative study is produced by the nonprofit American Legislative Exchange Council – a promotor of limited government, free markets and federalism – in conjunction with national economist Arthur B. Laffer, conservative economist writer Stephen Moore, and ALEC’s chief economist and Executive Vice President Jonathan Williams.

The authors, summarizing North Carolina, said, “This is largely due to the commitment to tax reform over the last decade, including the switch to a flat tax in 2015 and business income tax reform in 2021 that will phase out the tax altogether over the next five years.”

A Republican majority Legislature coincides with the ALEC rankings. Republicans for the first time in 140 years – since Reconstruction following the Civil War – won majorities in both chambers in 2010, overcoming maps drawn by Democrats. In 2012, Republicans made it a trifecta when Pat McCrory became just the third GOP governor since 1901.

Democrat Roy Cooper is wrapping up his eighth, and final, year as governor since beating McCrory by 10,277 votes of more than 4.7 million cast in November 2016. He routinely criticizes the lawmakers and their policies, and even forecasts dark days ahead because of them.

Still, other entities agree North Carolina is among if not the premier destination for business. Site Selection magazine last May named it top state and winner of its Prosperity Cup for the third consecutive year, an honor for landing capital investment projects; and CNBC last July for the second straight year named it No. 1 in its America’s Top States for Business.

ALEC’s performance ranking of the last 10 years considers state gross domestic product, absolute domestic migration, and non-farm payroll employment. All are influenced by state policy.

The outlook on 15 state policy variables, the report says, favors “states that spend less, especially on income transfer programs, and states that tax less – particularly on productive activities such as working or investing – experience higher growth rates than states that tax and spend more.”

Top marks in the outlook were achieved by no estate or inheritance tax levied; a right to work state – meaning an option to join or support a union; and the state minimum wage equal to the federal floor of $7.25. The top marginal corporate income tax rate of 2.5% is fourth best, and the $20.71 per $1,000 of personal income for property tax burden is ninth.

The negatives for the nation’s ninth-largest state of about 10.8 million was 31st with 517.7 public employees per 10,000 population.

Only Utah was better in the outlook ranking in 2023. This year the top three is Utah, Idaho and Arizona. Those states, respectively, were third, second and fourth in the performance rankings.

Also in the performance rankings, Florida was first, and fifth through 10th were Colorado, Texas, Nevada, Washington, Georgia and South Carolina.

Utah, Idaho, Arizona, North Carolina, Texas and Georgia were the only states to make top 11 in each.

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