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 By removing this outdated and burdensome tax, the state can attract greater investment, stimulate job creation, and support the growth of startups and struggling businesses.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.