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By: Representative John M. Blust

Public officials in the legislative branch of government are vested with an enormous power – the power to levy taxes or the people they represent. If mandated taxes are not paid in a timely fashion, a citizen’s property can be seized to satisfy the amount owed. This creates an inextricable link between taxation and property rights, one of the core principles underpinning American freedom and the prosperity freedom engenders.

“The power to tax involves the power to destroy”, wrote Chief Justice John Marshall in an 1819 decision by the United States Supreme Court, and “the power to destroy may defeat and render useless the power to create.” The destructive power of taxation demands a very judicious and sober use of this power. Governments at every level should fund only those critical functions that cannot or should not be left to the private sector. Those functions should be carried out in the most efficient manner possible so that the minimum amount necessary is taken from taxpayers.

Taxation is destructive because it undermines the incentive, desire, and motivation for citizens to work, save and invest. Taxation lessens the entrepreneurial willingness to risk time and capital to develop the creative ideas that lead to additional wealth creation and progress. Whenever an activity is taxed, less of that activity will be undertaken. When the fruits of labor, savings and investments are taxed at too high a level, there will be less of these desirable activities.

Perhaps no one more accurately described this phenomenon than Franklin Delano Roosevelt, while he was first running for President in 1932: “Taxes are paid in the sweat of every man who labors because they are a burden on production and can be paid only by production. If excessive, they are reflected in idle factories, tax-sold farms, and, hence, in hordes of the hungry trampling the streets and seeking jobs in vain. Our workers may never see a tax bill, but they pay in deductions from wages, in increased cost of what they buy, or (as now) in broad cessation of employment.”

The Wall Street Journal has calculated the tax burden as a percentage of the nation’s total economic output and correlated it to the level of economic growth over several years. The comparison between the level of taxation and economic growth clearly demonstrates that the economy turns down when a certain high level of tax burden as a percentage of gross national product is reached. This data seems to indicate that there is a trigger point for an economic recession in the form of high taxation. When the tax burden reached this trigger point in 2000, a recession resulted.

Few Americans realize that they are paying more to the government through taxes than they are for food, clothing, shelter, and transportation combined. This can partly be explained by the fact that governments have been successful at hiding the true impact of taxation on citizens. The income tax is subtracted each week from paychecks in the form of withholding so that the wage earners are lulled into the belief that they only earn their net take home pay. The sales tax is hidden within the total cost of goods when paid for at the counter. Many people pay their property taxes automatically through their mortgage payments. Without exception, every category of government expenditure develops its own constituency that pushes for the continuation of or an increase in that spending. Consequently, public officials get far less direct pressure to hold down taxes than they do to increase spending.

One has only to look at the experience of California to see the destructive effects of excessive levels of taxation on a state economy. Investment capital, jobs, and opportunity fled California to lower-taxed neighboring states. The last few years have seen the enactment of enormous tax increases in North Carolina as we have trended toward the failed California approach. The huge tax increases of the last few years have left North Carolina with the second highest tax burden in the southeast and have negatively impacted job creation in this state.

Legislators should never forget that every dollar spent by the state must first be taken from a taxpayer whose work earned the dollar. The state is in effect, telling the taxpayer that there are vital things the state needs to do which gives the state a greater moral right to the dollar than that of the person whose efforts created the dollar. When the state takes a dollar from a taxpayer, the state therefore owes a moral duty to the taxpayer to give back a dollar’s value in some vital government function such as education, public safety, roads, etc. From what I have observed in the state legislature, the state is giving back only 60 to 70 cents in value from each dollar taken from taxpayers.

A private business cannot do this and survive. Customers can simply go to a competitor for better value. Most government functions do not have competition so the public must look to the people it elects to insure full value for their tax dollars. Legislators must remember we possess the power to destroy and enact meaningful reforms to minimize the use of this power such as an open budget process with full participation by all legislators, zero-based budgeting, and a cap on overall spending growth in any particular year.

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