TO THE EDITOR:
Orange County voters should strongly resist voting to increase the sales tax in the upcoming November referendum. What is erroneously being sold as a measure to spur economic development will, in reality, have just the opposite effect.
Any tax increase takes capital from both investment and consumer spending that would spur growth in the private sector. Such increases create situations in which marginal business transactions will not occur. With the increased costs now associated with purchasing goods, otherwise profitable transactions would no longer occur, leading to further economic hardship.
In these trying economic times, a more effective solution to fostering economic development would be to do just the opposite: Lower the tax burden to attract new businesses to the area, which would create jobs and foster economic growth. It is worth noting that this notion of not increasing taxes during economic recession — and perhaps even lowering them — is not necessarily a conservative stance.
In June, Christina Romer, President Obama’s hand-picked chairwoman of the Council of Economic Advisors, published a paper titled “The Macroeconomic Effects of Tax Changes,” that convincingly demonstrates the damaging effects of tax increases. Her research suggests that every tax increase of one percent of GDP lowers real GDP by almost three percent. Similarly, any tax increases in Orange County would have an undesirable effect on the local economy and should be avoided.
John Eick
Senior
Political Science, Public Policy
