(Carolina Journal) North Carolina would boost economic growth and wealth creation by replacing its existing income tax with a new “flat-rate consumed income tax.” That’s the prescription the John Locke Foundation’s top economist offers in a new Spotlight report. “The state’s current income tax penalizes work, saving, investment, and entrepreneurship,” said report author Dr. Roy Cordato, JLF Vice President for Research and Resident Scholar. “Those are the very income-generating activities that lead to the production of goods and services that spur economic growth. If you’re interested in growth, a flat-rate consumed income tax is a much better option.” As its name implies, a flat-rate tax would apply just one tax rate, regardless of the amount of income taxed, Cordato said. “Unlike our existing system, a flat-rate tax offers no disincentive for people to work overtime, take a second job, or make other decisions that generate additional income. The next dollar of income is taxed at the same rate as the previous dollar.” Focusing taxation on consumed income would remove the existing bias against saving and investment, said Cordato, a Ph.D. economist.
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