At first blush, the Tarheel State and the Golden State have little in common. California has nearly four times the population of North Carolina and almost three times the square miles. But each state shares almost the same number of border miles with neighboring states. As Speaker Pro Tempore Dale Folwell (R-Winston Salem) recently mentioned, California shares 1,022 miles with Oregon, Nevada and Arizona while North Carolina shares 925 miles with South Carolina, Georgia, Tennessee and Virginia.
This is much more than just a curious geographical fact; it directly affects the marketplace. Virtually all of California’s major cities (San Francisco, Los Angeles and San Diego) are situated along the Pacific coast, hundreds of miles from the nearest state. Sacramento is the nearest major city and it is 100 miles from Nevada. Without competition, many governments eventually run amuck.
Even if CEOs at Boeing, Kaiser Permanente, Disney, Wells Fargo or Bank of America wanted to relocate their west coast operations to less expensive alternative sites, the distance to a nearby, more favorable state is simply too great.
The same is not true in North Carolina. Charlotte is only 12 miles from South Carolina; Asheville is 53 miles from Tennessee; Wilmington is 48 miles from South Carolina and Winston-Salem is only 61 miles from Virginia.
This difference means that politicians in California rarely worry about a major employer relocating. Just consider that California has a top marginal personal income tax rate of 10.3% while Nevada has no income tax at all. The average property owner in California pays $2,839 in property taxes while the average owner in Nevada only pays $1,749 per year. California’s maximum marginal corporate income tax rate is the 10th highest in the U.S. Yet even with those disparities, a move from California to Nevada is a major one, for both businesses and their employees.
In contrast, North Carolina collects personal income tax at a maximum marginal rate of 7.75% compared to 7.0% in South Carolina and 5.75% in Virginia. North Carolina’s flat corporate income tax rate of 6.9% compares to 5.0% and 6.0% flat taxes in South Carolina and Virginia, respectively. Property owners pay a median property tax of $1,209 in North Carolina compared to $689 and $1,862 in South Carolina and Virginia, respectively.
Do employers really care about the income, sales and property taxes when they look at sites? Of course they do but, in all fairness, Husqvarna, Electrolux, Chiquita, MSC Industrial, Peak 10 and hundreds of other employers chose the Queen City because our positives outweigh our negatives. We are a Can-Do, business-friendly, livable community with an educated workforce, world-class airport and four unique seasons.
Still, alternative sites fewer than 50 miles from their current headquarters exist for the CEOs at Belk, Duke Energy, Family Dollar, Goodrich, Nucor, Reynolds American, Wells Fargo and Bank of America any day they decide to strategically lower their tax bills. The same is also true for hundreds of heads of households who decide where to relocate their families every year. Rock Hill, Ft Mill, Myrtle Beach and Danville are nice places to live and work too.
Every time the North Carolina Legislature, City Council and County Commission debate public schools, street repaving, animal control, public safety, street cars, bridges, social services and, in particular, their tax revenues, they must also look over their shoulders and see what the competing neighboring state is doing. Unlike Californians, North Carolinians have a choice about where we live and work.