Massachusetts study points to NC tax policy as model of success

North Carolina’s decade of income and corporate tax cuts produced nearly 450,000 new private sector jobs, while Massachusetts — which imposed a new millionaire’s surtax in 2023 — lost 18,000 jobs over the same period, according to a new analysis from a Boston-based policy organization.

The March 2026 paper from Pioneer Institute compared the two states’ divergent tax policies from 2014 to 2025 and their effects on job creation, business formation, and state revenues.

North Carolina cut its individual income tax from a 5.8% flat rate in 2014 to 4.25% as of the 2025 tax year, with further reductions scheduled. The corporate income tax dropped from 6% to 2.3% and is on a path to full elimination by 2030.

Massachusetts, by contrast, made only modest changes to its 5% flat income tax and in 2023 imposed an additional 4% surtax on income exceeding $1 million.

These differences led residents to vote with their feet, according to the research. From January 2020 to December 2025, North Carolina added 448,900 private sector jobs — an 11.5% increase, well above the national average of 4.6%. Massachusetts lost 18,000 jobs during the same period, making it one of only three states to shed jobs. 

North Carolina also saw its total number of businesses increase by 83,500, or 29%, from 2020 to mid-2025; while Massachusetts grew just 11.4%.

“The results highlighted in this study are consistent with what we would expect from a more competitive tax structure: stronger job growth, more business formation, and solid revenue gains driven by economic expansion,” said Joseph Harris, fiscal policy analyst for the John Locke Foundation. “North Carolina has benefited from those policy choices over the past decade. However, with other states now accelerating similar reforms, the state’s relative advantage will depend on whether those policies continue.”

The Pioneer Institute found the sharpest difference when comparing the two states’ premier research and technology corridors. The greater Boston area — home to well-recognized universities, hospitals, and tech firms — saw no private sector job growth from 2020 to 2025. In contrast, North Carolina’s Research Triangle region added more than 291,000 jobs, a 15.2% increase, over the same period.

The Pioneer Institute also found favorable results for the Tar Heel State on overall tax revenues. Both states grew their real, inflation-adjusted tax revenue over the past decade — North Carolina by 22% and Massachusetts by 34%. But the difference was in how those taxes were collected. Massachusetts’ stronger revenue growth was almost entirely driven by its new millionaire’s surtax. Without it, the authors note, the state’s income tax revenue would have “at best remained flat.”

Meanwhile, North Carolina’s sales tax revenue grew 61.4% — nearly double Massachusetts’ 34.6% — driven by population and business growth.

“North Carolina was able to increase affordability for businesses and individuals through a lower tax burden, increase business investment and population growth, all while continuing to grow the state’s real tax revenue,” wrote the Pioneer authors Jim Stergios and Aidan Enright.

Despite the positive momentum for North Carolina, researchers at the John Locke Foundation have noted there is room for improvement.

Brian Balfour, Locke’s vice president of research, recently warned that competing Southern states are aggressively cutting taxes. Georgia, for example, could eliminate its personal income tax by 2032, while South Carolina’s Senate has passed a bill to phase out its income tax as well. Louisiana also eliminated its franchise tax this year.

North Carolina’s income tax drops to 3.99% in 2026 under current law, with further reductions possible if revenue targets are met.

Balfour said the legislature should go further — repealing the franchise tax, indexing the standard deduction to inflation, and eliminating the state’s capital gains tax.

“Standing still — or slowing down — on tax reform puts North Carolina at risk of being passed by regional neighbors who are significantly picking up the pace,” Balfour wrote.

“Massachusetts study points to NC tax policy as model of success” was originally published on www.carolinajournal.com.