Francis Koster: Is being friendliest state for doing business our best investment?
Published 12:00 am Sunday, April 2, 2023
By Francis Koster
In a recent CNBC survey, North Carolina was ranked number one among all 50 states as the best state in America to do business in based. The ranking is based on how the 50 states encourage or discourage the private sector economy. This award results from a trend that started when we ranked 9th in 2018, , 3rd in 2019, and attained #1 In 2022.[i] The total score is based on a survey which considered many factors, including the state’s higher education system. The performance of the state’s K-12 schools was not considered.
Yippee for business and private investors!
Central to this victory is our private sector economic environment, largely a result of serious cuts to corporate taxes passed by the legislature.
The tax rate for corporations doing business in North Carolina was 6.9% until 2014, when it was dropped to 6%, followed by additional 1% drops every year until 2018 when it reached 3%. For the next 3 years it sat at 2.5%. Due to legislation passed in 2021[ii] the rate is scheduled to trend downward to zero by 2030.[iii] This will result billions of dollars in potential income which will not go into our state bank account.[iv]
And after 2030 “to encourage job creation”, corporations doing business in North Carolina will pay no corporate income or franchise tax, but individuals and homeowners will continue to pay income taxes.[v] It is astonishing.
In addition, in 2021 and 2022 a total of $2.4 billion dollars in state incentives was granted to companies to lure them to set up their business in North Carolina. Of that $2.4 billion, $888 million dollars failed to create a single job according to a study done by the conservative John Locke Foundation.[vi] Not a great investment.
Compare our #1 ranking for being business friendly to the fact that North Carolina K-12 schools now rank 48th among the fifty states in funding per student according to the respected Educational Law Center. And when adjusted for inflation, North Carolina funding per student has declined 10% since 2008. [vii]
One of the results of this is that North Carolina K-12 educational system’s quality is ranked at 44th out of the 50 states.[viii] The legislature claims they do not have the money to make more investment.
As a portion of the total economic activity of the state (GDP) the money invested in North Carolinas K-12 public school education was the smallest percentage of any state in the union – only 2.3%.[ix]
How does being 48th lowest state in America in funding schools contribute to our being the 44th lowest ranked state in America for student success? One major reason is we have old schools with poor indoor air quality.
Nationally, corporations have discovered one very clever way to increase their profitability, and earn a handsome rate of return on their investment. For every dollar invested, they see an increase of 8% ($6,500 annual) in productivity.[x] They do this by fixing their old buildings to bring in more fresh air – the exact potential investment that our state legislature’s rules make almost impossible for our schools to do.
The problem our K-12 schools have is that under current North Carolina law (which the legislature could change) the majority of all North Carolina school buildings are paid for locally. Wealthy school districts tend to have newer schools, poorer districts obsolete buildings with poor indoor environments. These old schools usually have no ability to bring fresh oxygen rich air into classrooms, which multiple studies have proven causes students to lose one or two letter grades worth of learning each and every consecutive year.[xi]
The families of the rich get better education, and those of the lower income groups lose learning, scholarships, and upward mobility.
Our state legislature is doing things that bring immediate happiness and joy to the large corporations that often donate to their campaigns, but cause sadness and frustration to low income families with children. The first one is easy to measure, the second one is almost invisible.
Who are our elected officials working for? Is this how we want our state and country to operate?
Francis Koster Ed.D. lives in Kannapolis. He is a retired pediatric healthcare administrator who runs a Not-For-Profit called The Pollution Detectives.
[iv] Total of numbers from https://www.ncleg.gov/Sessions/2021/FiscalNotes/Senate/PDF/SFN0105v4.pdf, using FY 2025-26 projected until 2023 with no increase for inflation or increased profitability of businesses. (Likelihood of that is very low)
[x] Economic, Environmental and Health Implications of Enhanced Ventilation in Office Buildings
Int. J. Environ. Res. Public Health 2015, 12(11), 14709-14722;