RALEIGH – The News & Observer headline got it exactly right: a working group of politicians, business leaders, economists, think tankers, and others agreed that the “N.C. tax code badly needs updating.” Unfortunately, as a member of the panel in question, I can say that agreement on the general proposition by no means translated into agreement on specific reforms.

The group was convened a couple of months ago by the Institute for Emerging Issues at N.C. State University. Founded by former Gov. Jim Hunt, and still bearing his unmistakable imprint, the institute stages the annual Emerging Issues Forum in Raleigh as well as ongoing events and activities in other communities around North Carolina. It picks a general issue category – last year it was health care, this year it’s tax reform – and uses the Emerging Issue Forum, complete with big-name speakers and large audiences, to kick off a multi-year effort to promote deeper dialogue and policy innovation.

The 2006 Forum will be held at N.C. State’s McKimmon Center on Monday and Tuesday, Feb. 6 and 7. Speakers include Hunt, New Mexico Gov. Bill Richardson, former Treasury Secretary Paul O’Neill, Steve Forbes (hooray), Paul Krugman (groan), and many more.

I’m glad to see the institute taking on this important issue. I’m doubly glad to see it cast its net widely to include tax-policy analysts from across the spectrum. The conversations in which I participated in advance of the February forum by no means reflected an attempt by Gov. Hunt or anyone else to impose a specific model for tax reform on unwilling participants. Many interesting and important differences got aired, as did a striking number of commonalities among the working-group members regarding general principles and some issues of application – such as a near-universal disdain for targeted tax incentives intended to promote economic development.

But when it came to grappling with what reforms might actually make the tax code less prone to distort North Carolina’s market economy, consensus gave way to either pointed debate or, more frequently, an excess of risk-aversion. Some panelists believed that whatever the merits of eliminating special tax breaks, lowering marginal rates through base-broadening, or doing some serious about the preposterously complicated and counterproductive corporate-income tax, there was no point discussing proposals that would be “unpopular” with vocal interest groups.

And then there was the problem of local-government finance. The group spent most of its time on state sales and income taxation. Property taxes and city/county affairs got the least amount of attention. I’m not sure there was an alternative to this outcome, but it was unfortunate. Local officials firmly believe that they need new “revenue options” to replace the current level of reliance on property taxes. That is, they’d like ways to raise taxes without alerting the taxpayers they are doing so. I think such policies would take us in precisely the wrong direction. Taxes should be more visible, not less. Local governments do have major fiscal problems, but I think the solution lies in rethinking the relationship between the state and localities – alleviating counties of any financial responsibility for Medicaid, for example, and allowing more flexibility in the use of state education dollars – while reforming but retaining the property tax as a primary revenue source.

There’s a lot more to say about what happened within the institute’s working group on tax reform. A more effective way to convey that information, however, might well be for interested readers to attend the forum – particularly if you bookend it by starting the week with the Institute for Emerging Issues and ending it with the John Locke Foundation.

Hood is president of the John Locke Foundation.