(The Center Square) – New business startups in North Carolina are continuing at a record pace, contributing to higher than anticipated tax revenues in recent years.
Secretary of State Elaine Marshall highlighted the near-record levels of new business creation filings for the first quarter of 2023 at the May meeting of the Council of State.
The data shows North Carolinians created roughly 60,000 new businesses between January and April, essentially matching the 60,000 to 61,000 recorded during that four-month period the prior two years.
Those figures are in sharp contrast to 39,000 businesses created in the first quarter of 2020, when Gov. Roy Cooper shut down operations for many amid the COVID-19 pandemic.
“North Carolina’s entrepreneurial spirit is alive and well as new business creation filings remain historically high compared to pre-COVID creations,” Marshall said.
The record number of start-ups come as the state has collected significantly more tax revenues than anticipated in recent years. In fiscal year 2020-21, the roughly $29.5 billion collected represented a 23% increase over the prior year. Those revenues have since swelled to an estimated $33.76 billion in collections for fiscal year 2022-23, or more than $3 billion over what was anticipated.
Marshall noted that in addition to new businesses, her office has witnessed a record number of annual reports filed by businesses in the first quarter of 2023. Since January, more than 461,000 annual reports have been processed. The figure represents 50,000 more than last year and 127,000 over the 2020 figure.
“We continue to do everything in our power at the Secretary of State’s Office to get these new business owners up and running as rapidly as possible and we are aggressively looking for ways to help these business owners get access to available resources to help their new ventures become successful,” she said.
The record numbers substantiate numerous national awards and rankings that have highlighted the state’s business climate in recent years, though it’s unclear how many of the start-ups stem from businesses that restarted after folding during the pandemic.
In April, the American Legislative Exchange Council ranked North Carolina second in the nation for economic outlook, which the think tank attributed to substantial improvements in the state’s tax policy since ALEC launched its annual Rich State, Poor States study in 2007.
“The best turnaround story from Rich States, Poor States so far has been that of North Carolina. In the first edition of the rankings, the Tar Heel State ranked 21st and would drop to a low of 26th over the next few editions,” the report read. “Today, North Carolina stands strong in 2nd. This is largely due to the commitment to tax reform over the last decade, including the switch to a flat tax in 2015 and business income tax reform in 2021 that will phase out the tax altogether over the next five years.”
North Carolina ranked fourth nationally in the study for its top marginal corporate income tax rate of 2.5%.