According to IRS and Census data, North Carolina gained about $30 billion annually in adjusted gross income (AGI) from 1992 to 2014 due to residents moving in from other states. The majority of North Carolina’s new residents came from New York, followed by New Jersey, Virginia, Pennsylvania and California. During the same time period, however, North Carolina lost wealth from residents moving out of the state. Although North Carolina gained more wealth than it lost overall, its neighbors — South Carolina and Tennessee — were the top gainers from North Carolinians moving into their states. Could tax considerations be a factor in these relocations?
In tax year 2013, North Carolina had state income tax rates ranging from 6 percent (on incomes of more than $12,750) to 7.75 percent (beginning at $60,000) with a $1,150 personal exemption per individual. Later in 2013, however, Gov. Pat McCrory (R) and the General Assembly passed a significant tax reform package that included a reduction in the state income tax to a flat rate of 5.75 percent, effective January 1, 2014. How does the tax burden resulting from the new flat income tax rate compare to North Carolina’s neighbors?