Why Newcomers Are Choosing North Carolina

By Donna King
Carolina Journal

You can feel it in conversations across North Carolina, more new neighbors, more out-of-state license plates, more people saying they “just moved here from New York” or “decided to leave California.”

That anecdotal sense is backed up by new IRS migration data analyzed by the National Taxpayers Union Foundation. The numbers show a steady flow of Americans leaving higher-tax states like California, New York, and Illinois and relocating to lower-tax, lower-cost states. North Carolina stands out in that trend, ranking third in the nation, a top destination in the country for people making the move.

The scale is striking. On average, our state is gaining a new resident every 7.36 minutes and many of those newcomers are working-age professionals and higher-income earners.

So what’s driving it?

It’s not one thing only; rather it is a perfect blend, a vinegar-based BBQ sauce, if you will. While many of us are shocked at neighborhood real estate prices, housing costs are low compared to high-tax states. Our quality of life, schools, and jobs are a blend of small Southern town charm and enviable tech, development, and finance.

But income tax policy is an undeniable part of the recipe too. When professionals can increasingly do their job from anywhere, the question becomes less “Where is my office?” and more “Where can my paycheck go further, and where do I want to build my life?”

In many modern, high-income professions work locations are determined simply by connectivity, an airport, and cost of living. More than 25 states have moved to reduce income taxes over the last four years with that trend in mind.

That shift accelerated during the COVID pandemic and has moderated since then with more people doing hybrid work. Remote and hybrid approaches untethered a lot of people from traditional job centers. Now, a software engineer in Manhattan or a consultant in San Francisco can just as easily live in Raleigh or Charlotte without changing employers. That flexibility has reshaped how states compete for residents and grow their tax base.

North Carolina has been positioning for that moment for a decade with additional tax reductions already scheduled under current law. Our Republican-led legislature as played the long game, enacting a deliberate, phased reduction of personal income taxes, starting with sweeping reform in 2013.

Shortly after taking majority control of the state legislature in 2010, lawmakers replaced a complex, progressive income tax system (rates were as high as 7.75%) with a flat 5.8%. They followed that with a multi-year legislative effort to reduce income tax rates steadily to 5.25% by 2019, below 5% by 2022, and 3.99% by 2026. Over roughly 15 years, the state has shifted from one of the higher-tax structures in the Southeast to a significantly lower, flatter system.

The result has been restoration of our economic competitiveness, investment, and business expansion. Lower taxes brought faster job creation, increased private investment, and increased sustained revenue growth for our state. All of these ingredients have created the in-migration that this study highlights.

North Carolina’s tax policy future is likely to come up again in the spring legislative session, where lawmakers will debate how and whether to stay on track with planned tax cuts. Some will argue for caution, pointing to notoriously shifting budget forecasts and calls for more government spending. Others will say the state’s ability to attract new high-income residents and industry depends on maintaining a competitive tax environment.

Both sides are really talking about the same underlying question: How does North Carolina grow when people are more mobile than ever?

That’s the real story here. States aren’t just competing for companies anymore. They’re competing for people. And increasingly, people are choosing based on a mix of affordability, opportunity, and flexibility.

North Carolina is clearly doing something right in that environment, as evidenced by the National Taxpayer’s Union Foundation study. The challenge is making sure we doesn’t lose momentum just as we are gaining ground, after recovering from the declining revenue, high tax rates and teacher furloughs of the early 2000’s.

Responsible, small-government policy that prioritizes personal and economic autonomy is policy that meets people where they are; from the north, headed south.

Donna King serves as editor in chief for the Carolina Journal and Executive Vice President of the John Locke Foundation