North Carolina should keep the income tax on corporate profits

No matter what we look like or where we live, North Carolinians want to care for our families and leave things better for those to come. But as our work has made the state prosper, a handful of politicians have rigged the rules to redirect resources from our communities to wealthy corporations who benefit from our work.  

Legislative leaders in the NC General Assembly have chosen big corporations over North Carolina’s people, homegrown businesses, and future generations by passing policy that will eliminate the state corporate income tax beginning in 2030.  

When these corporations no longer contribute to our state by paying these taxes, North Carolina will have $2 billion less in public money, a number that will grow each year.1Logan Rockefeller Harris and Alexandra Forter Sirota, “NC Leaders’ Tax Cuts for Wealthy Mean We Will Lose More than $13 Billion for NC Needs” (NC Budget & Tax Center, October 10, 2023), is even though corporations, like all of us, benefit from countless public investments — from the education that prepares our workforce to the roads that get goods to market. Just like people in North Carolina pay taxes on our incomes, corporations should pay taxes on the profits they realize.

Quick Facts on the Corporate Income Tax

The corporate income tax rate for 2024 is 2.5 percent, and unless lawmakers act to change current law, it will fall to 2.25 percent in 2025 and continue to decline until it reaches 0 in 2030. North Carolina’s current rate is already the lowest in the nation among the 44 states with the tax, and the average rate among our neighboring states is twice as high.2“Corporate Income Taxes,” State and Local Backgrounders (Urban Institute, April 20, 2023),

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Most companies that pay corporate income taxes are large, multi-state, highly profitable corporations.  

Most businesses do not have to pay corporate income taxes, because the tax only applies to corporations that are organized under a specific legal structure.3Most businesses are structured as “pass-through entities,” meaning their profits are passed to owners or shareholders who then pay personal income taxes on that money. “What Are Pass-through Businesses?,” Key Elements of the U.S. Tax System (Tax Policy Center, January 2024), Nationwide about 85 percent of businesses are structured in a way that means they do not have to pay federal or state corporate income taxes.4Ibid. “Corporate Income Taxes.”

Most of the companies that pay the corporate income tax in North Carolina operate in multiple states and have profits of more than $25 million — 72 percent of all corporate income tax collections in our state come from these companies.5“Corporate Income and Business Franchise Taxes: Statistics and Trends Tax Year 2020” (North Carolina Department of Revenue Tax Research & Equity Division, February 2023), These highly profitable companies, not small businesses or local entrepreneurs, will get a windfall when the corporate income tax is eliminated.

Eliminating the corporate income tax will enrich wealthy shareholders and executives — and make North Carolina’s tax code more unequal.

Corporate income taxes are mostly passed on to affluent shareholders or to highly-paid managers and executives, many of whom live outside of North Carolina.6 William G. Gale and Samuel I. Thorpe, “Rethinking the Incidence of the Corporate Income Tax” (Brookings Institution, May 10, 2022), A 2018 analysis found that over 80 percent of corporate tax cuts in North Carolina flowed out of state.7Patrick McHugh and Alexandra Sirota, “Corporations over Carolinians? Why North Carolina Doesn’t Need More Tax Cuts,” Budget & Tax Center (North Carolina Justice Center, May 2018), Rank-and-file workers on the other hand, have received little to no benefit from recent corporate income tax cuts.

North Carolina’s tax code is already “upside-down,” meaning that people with the lowest incomes pay the highest share of their income in state and local taxes.8“North Carolina: Who Pays? 7th Edition,” Who Pays? (Institute on Taxation and Economic Policy, January 9, 2024),  Because corporate income taxes primarily affect the very rich, eliminating it would worsen this inequity. If the income tax rate were zero for 2023, more than two-thirds of the cut would flow to the richest 20 percent of North Carolina households.9Special data request to the Institute on Taxation and Economic Policy. Combined with other tax cuts, reducing the corporate income tax means a greater reliance on sales taxes, which require people with the lowest incomes to contribute the largest portion of their income in tax.10Sales and use taxes have gone from about 26 percent of NC General Fund revenue in Fiscal Year 2013 to 31 percent in Fiscal Year 2022 “Statistical Abstract of North Carolina Taxes” (NC Department of Revenue, 2022),

Revenue from the corporate income tax supports the growth and opportunity North Carolinians deserve. 

While corporate income tax payments are a very small portion of total costs for individual businesses, they add up to a crucial contribution to our collective effort to fund public services. The $2 billion our state plans to give away in corporate tax cuts could expand childcare assistance to every eligible family. This money could fund a child tax credit that would slash child poverty by 25 percent, expand and preserve affordable housing for tens of thousands of families, and invest in infrastructure like water systems, public transit, and broadband.11Nicole Stafford, “Tax Cuts for Richest 20% or Fund the Things North Carolinians Need?,” NC Budget & Tax Center (blog), June 30, 2023,

North Carolina could put this public money to work to build an economy that works for everyone, investing in research at public universities, equitable workforce development at community colleges, and technical assistance for the small, homegrown businesses that generate most job growth.

Low corporate income tax rates don’t drive job creation, small businesses homegrown in NC do.

Most companies hire when demand for what they sell goes up. State and local taxes account for just ¼ of 1 percent of all business expenses, so tax breaks are unlikely to drive hiring decisions.12Michael Leachman and Michael Mazerov, “State Personal Income Tax Cuts: Still a Poor Strategy for Economic Growth” (Center on Budget and Policy Priorities, May 14, 2015), More than 40 years of research has found that income tax cuts for corporations may have a small effect, but more likely no impact, on economic growth.13“State and Local Business Taxes Are Not Significant Determinants of Growth” (Grading the States, 2024 2015), That is because the loss of public funding can lead to less investment in the public services, like education and infrastructure, that businesses need.14 Michael Mazerov, “Cutting State Corporate Income Taxes Is Unlikely to Create Many Jobs” (Center on Budget and Policy Priorities, September 14, 2010),

In 2023, North Carolina’s small businesses generated three-quarters of employment growth in the state.15 “2023 Small Business Profile: North Carolina” (U.S. Small Business Administration Office of Advocacy, 2023), Since most of these businesses aren’t subject to the corporate income tax anyway, eliminating the tax won’t support their profitability and growth.

Let’s come together and demand policymakers keep the corporate income tax. 

There’s still time to stop the scheduled elimination of the corporate income tax. North Carolina needs all corporations to pay what they owe so that workers, homegrown businesses, and communities have what we need to drive our economy forward.