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1 Elizabeth Malm, Critics of North Carolina Tax Reform Miss the Point 1 (2013)

handle is hein.taxfoundation/ffdgjxz0001 and id is 1 raw text is: FONAINFiscal F act May 15, 2013 No. 369 Critics of North Carolina Tax Reform Miss the Point By Elizabeth Malm Last week, I had a lively debate with Jared Bernstein of the Center on Budget and Policy Priorities1 on the future of North Carolina tax reform.2 I want to follow up on three main points of contention. First, that income taxation will not impede growth; second, that income taxes don't contribute to volatility of tax revenues; and third, that regressivity of sales taxes means we should abandon tax reform proposals that move away from income taxation. I'll address each in turn. Does income taxation create disincentives that impede growth? Absolutely. Economically speaking, income taxes are the worst types of taxes because they alter individuals' decisions to work and to itvest. This is especially true for those witk high graduated raes. An age-old adage notes chat when you tax somhing, you get less of it. The last thing we want to do is discourage those things that add productive value to the economy. A common counterargument to this idea is that encouraging consumption alone can push the economy forward. Consumption, though an integral part of' our complex economy, is the byproduct of growth, not the driver. A recent Forbes article articulates this point eloquently: Consumer demand does not necessarily translate into increased emphoyment. That's because consumers lon't employ people. Businesses do. Sitce new hires are a risky and costly investment with unknown filture returns, employers must rely on their expectations about the frure and weigh those decision very carefulily.... Where do these consu.mers get their tlney to spend? Before we can consumc, we need to produce and earn a paycheck. And paychecks have to flow to productive - that is value-.creating-behavior .... Our various 1 Center on Budget and Policy Priorities, Jared Bernstein, it :pS/w--.----p----jprVi.dek {flf-----d<2--U . 2To watch the event in its entirety, visit ----/iw ---------------------------------c itW2 dtb tW ~ NatC ta

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