Until 1986, most state and local taxes were deductible on federal tax returns. But in that year the tax code was amended to end this treatment for sales taxes, while keeping it for income and property taxes. As a result, when states move to raise taxes, they look more to income taxes -- relative to sales taxes -- than they did prior to 1986.

• From 1984 to 1986 income tax hikes made up 30 percent of all state sales or personal income tax increases.

• But from 1992 to 1994 that figure jumped to 43 percent.

• In 1984 states adopted 13 sales tax hikes and only two income tax increases.

• Yet ten years later there were 17 income tax hikes and only ten sales tax increases.

The same thing happened with regard to tax cuts.

• In 1984, income tax cuts outnumbered sales tax cuts by a ratio of two-to-one.

• By 1994, there were the same number of each.

This tax bias has substantial negative effects.

• The encouragement this gives the states to tax production rather than consumption does significant economic damage by depressing economic growth.

• Leading states to favor one kind of tax over another undermines our federalist system.

Some economists are advocating an end to deductibility for all state and local taxes -- which would be one of the effects of a flat tax. Reformers note that these write-offs simply encourage states to tax and spend more than they otherwise would. In effect, the federal tax code gives $50 billion a year in subsidies to state taxation.

Also, higher state taxing and spending is associated with lower economic growth according to a study by economist Richard Vedder of Ohio University.

• Beginning in the 1960s, New York state started an upward tax spiral which placed a higher tax burden on its citizens than was in effect in neighboring states.

• The result was that New York's rate of per capita income growth was less than that of any of its neighbors.

• In fact, New Jersey's per capita income -- below that of New York in 1960 -- surpassed it by 1990.

Source: John E. Berthoud (Alexis de Tocqueville Institution), "Subsidizing High Tax Rates," Investor's Business Daily, March 29, 1996.