No Time Like the Present: Eliminating the Franchise Tax

North Carolina’s General Assembly has taken significant strides over the past decade to enhance the state’s position as a desirable business destination. However, there is work left to be done, and eliminating the state’s onerous and antiquated franchise tax should be a top priority for lawmakers in 2025.

Eliminating the franchise tax in North Carolina would bring several benefits, including: 

Simplify the tax system. The franchise tax is complex and burdensome for businesses to calculate, especially those with multiple subsidiaries. Removing it would reduce administrative costs and compliance challenges.

Increase business investment and job creation. As yet another “cost of doing business,” the franchise tax can deter investment, particularly during economic downturns. Eliminating it would encourage businesses to invest in new facilities, equipment, and jobs.

Encourage startups and struggling businesses, rather than penalize them. The fact that businesses must pay the tax even if they don’t make a profit makes it particularly punitive for companies that are already struggling, or are just starting up.

Eliminate North Carolina’s competitive disadvantage. Most states no longer have a franchise/capital stock tax, and several of those that do are in the process of phasing it out. This obviously puts North Carolina at a competitive disadvantage. Eliminating the franchise tax would make the state more attractive for investment and economic growth.

Reduce double taxation. The franchise tax can result in double taxation for businesses with subsidiaries. Removing it would eliminate this unfair burden, and allow businesses to reinvest their resources.

In conclusion, eliminating North Carolina's franchise tax is not just a matter of simplifying the tax system; it is a strategic move to foster a more business-friendly environment. By removing this outdated and burdensome tax, the state can attract greater investment, stimulate job creation, and support the growth of startups and struggling businesses. This change would position North Carolina more competitively on the national stage, aligning it with other states that have already phased out similar taxes. Ultimately, the elimination of the franchise tax would pave the way for a more robust and dynamic economy, benefiting businesses and residents alike. The time for action is now, and lawmakers must prioritize this critical reform in 2025.

Manufacturing: Room for Improvement 

North Carolina is no stranger to manufacturing. The Old North State is home to companies producing everything from poultry and tobacco products to software, pharmaceuticals, tires, and nuclear reactors. According to the NC Chamber, manufacturing accounts for nearly 17% of the state’s total output, and employs nearly 10% of the state’s workforce. That said, a recent article posted on the finance website Insider Monkey identified the 20 most industrial cities in the United States, and North Carolina is conspicuously absent from this list: 

20. Scranton, PA

19. Akron, OH

18. Austin, TX

17. Greenville, SC

16. Elkhart, IN

15. Columbus, OH

14. Grand Rapids, MI

13. Cincinnati, OH

12. Cleveland, OH

11. Milwaukee, WI

10. Phoenix, AZ

9. Philadelphia, PA

8. Minneapolis, MN

7. Atlanta, GA

6. Houston, TX

5. Detroit, MI

4. Dallas, TX

3. New York, NY

2. Chicago, IL

1. Los Angeles, CA 

There is clearly room for improvement. The Milken Institute has estimated that for every job created in manufacturing, 2.5 jobs are created in other sectors. Keeping manufacturing close to home can result in better brand image, faster and more efficient distribution, lower shipping costs, economic resilience, and sense of community. As shortened transportation and delivery distances reduces carbon emissions from transportation, in-state manufacturing can even help the environment!