Opinion: A pro-business state shouldn’t tax businesses for existing

July 17, 2026 - 22:37

An intern's recent analysis argues that North Carolina's franchise tax, an annual levy on a company's net worth, is fundamentally at odds with the state's self-proclaimed pro-business identity. Unlike income taxes, which target profits, the franchise tax is charged simply for the privilege of being registered to do business in the state. For small and growing firms, this can be a punishing fixed cost.

The tax is calculated based on a company's capital stock, surplus, and retained earnings. This means a startup that reinvests every dollar of profit back into growth can still face a significant tax bill, even if it shows little to no net income. A struggling business that has built up assets over the years but is now barely breaking even also gets hit. The argument is that this structure penalizes success and stability, two things a business-friendly state should encourage.

While large corporations can often absorb the cost, smaller operations feel the pinch acutely. The intern's critique suggests that if North Carolina truly wants to attract and retain entrepreneurs, it should eliminate this outdated levy. The state already has a corporate income tax. Charging an extra fee for simply existing, the argument concludes, sends the wrong signal to the very job creators the state claims to champion.