In effect, a sales tax "discourages labor" in the same way: if you have to charge customers more for your products because of sales tax, that discourage sales, and thus you have less revenue available to pay workers. The effect is the same. You can't eliminate income taxes and then magically have the same amount of capital available to pay wages, that's not how it works.

If the government has to raise $N total in taxes, that amount of money is coming out no matter what. It has to come out somewhere. The real question is distribution, and that's when you have to look at fairness of taxation and ability to pay. You can't just say income taxes discourage labor and ignore the question of where you're getting the taxes instead, and how the alternative taxation method affects labor.