This past Wednesday, the President of the Richmond branch Federal Reserve Bank, Jeff Lacker addressed the NC Senate to give his take on the current economic situation. You can read his full statement to the committee here.
Senator Phil Berger (R-Rockingham) asked President Lacker how raising taxes to fill the state's budget hole would effect the unemployment rate. Lacker responded by saying that increased taxes would slow the rate at which unemployed workers were reemployed, overall causing an increase in unemployment. Currently, the North Carolina unemployment rate is at 10.8 percent, the highest since records starting being kept in 1976.
The very next day, the NC House ignored his warnings and passed a $784 million tax increase.
It is also important to note that consumer spending accounts for 70% of the US GDP. Increasing taxes will have a direct effect on consumer spending, by decreasing the disposable income that consumer's spend on goods and services. This will prolong our recession and cripple our state GDP.