The economic recession has forced almost all states to make difficult budget decisions, including cuts to education funding and other essential government services. North Carolina is no exception. Faced with a projected $4.6 billion budget shortfall, the General Assembly last year cut services, increased taxes, and yet still had to rely on federal recovery funds to balance the budget. While the depth of the recession may have made last year’s budget shortfall to some extent unavoidable, the state’s outdated and volatile tax system exacerbated its magnitude. This Article examines the shortcomings of North Carolina’s existing tax structure. It then suggests alternatives to modernize the state’s tax system and stabilize tax revenues. These suggestions include broadening the sales tax base to include more services and closing existing corporate income tax loopholes. Reforms to the North Carolina tax system are long overdue. This Article provides a pathway to improving that system and calls for legislators to enact long-term solutions to the problems hampering North Carolina’s existing tax code. Ultimately, failure to do so will risk the state’s ability to continue providing much-needed services and educational opportunities to its citizens.