Study: Phasing out the Franchise Tax

North Carolina is one of only 16 states which impose a franchise tax. What is a franchise tax? It is a tax on business investment and wealth accumulation for S and C corporations. Several businesses are not subject to the tax, having escaped liability thanks to special carve-outs. The ones who pay the franchise tax are essentially taxed twice, paying in addition to the corporate tax rate.

The General Assembly is considering a reduction in the franchise tax rate, as well as a complete repeal. We contracted with the nonpartisan Beacon Hill Institute to determine the economic effects of both proposals.

Their modeling program shows that SB 622, which reduces the franchise tax rate, would create private sector jobs, increase real disposable income, improve business investment, and increase the state’s real gross domestic product. All the while, the franchise tax reduction would minimally affect the state’s bottom line.

Read the full Beacon Hill study here:

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