Working In N.C. Can Be 'Taxing' Proposition

Andy Karras has run a party rental business for 16 years, but he says tax time is anything but a celebration. By the time he pays the state's corporate, sales and income taxes, he said it is tough to turn a profit.

Karras said he would rather invest in his own company than give his money to the tax man.

"For one thing, we'd get more money in our hands so we could invest. Instead of laying someone off, we'd keep them employed." he said.

Statistics from the John Locke Foundation show North Carolina has the highest tax burden in the Southeast. North Carolina's top state income tax rate is the highest in the region, at 8.2 percent. The state also have the highest corporate taxes at 6.9 percent.

North Carolina's sales tax ranks second only to Tennessee, which does not have a state income tax. Some say North Carolina is no longer a friendly place to do business.

"Corporations will look over the course of a number of years at how much the tax burden will be in North Carolina, compared to Virginia or South Carolina, and that's a significant component in the decision whether to move there." said Roy Cordato, of the John Locke Foundation.

Increases in the state sales and income taxes are schuled to expire this summer, but Gov. Mike Easley and many state lawmakers say they should stay in place for two more years to fill a gaping hole in the state budget.

North Carolina has one of the lowest tax rates in another category. At 5 cents a pack, the state still has one of the lowest tobacco taxes in the country.