Farah Klein and Will Freeland bust the myth that raising tax rates doesn’t harm economic growth. In fact, it does, and progressives embrace the effect when it is applied to a pet program.
Ironically, many progressive groups that dismiss the case against high and inefficient taxes are happy to accept that taxes do indeed change behavior, just not productive behavior. Advocates of so-called sin taxes on cigarettes, soda, and liquor support those discriminatory taxes based on the premise that the tax will lead fewer citizens to engaging in these behaviors.
Citing studies from a range of reputable sources, including President Obama’s own former council of economic advisors, Dr. Pozdena and Dr. Fruits highlight the wealth of historical evidence in agreement with the theoretical case. This evidence establishes the proven negative effects of taxation on economic growth and investment. This includes national level studies, as well as those studies that analyze state level difference in tax policy and economic performance. Utilizing IRS taxpayer migration statistics, the research presented in Tax Myths Debunked proves that tax rates matter when decisions about where to locate one’s family or business arise.
Which means, as North Carolina prepares to reform its tax code, decisions must be made very, very carefully.