Economic theory, a growing body of empirical research, and real world evidence from states such as Connecticut all point to the same conclusions. High and rising state and local tax burdens can have a severe detrimental effect on economic growth. Therefore, restraining the overall level of state and local taxes is of prime importance in maintaining a thriving state and local economy. However, the specific composition of that tax burden can have a major influence as well. Theory as well as the preponderance of empirical evidence suggest strongly that sales taxes have less adverse impact on a state's economy than do income taxes.
It naturally follows, then, that state and local economic prosperity in the 1990s can be enhanced by focusing on three factors: 1) strict overall tax restraint, 2) maintaining tax burdens that are competitive with geographical neighbors, and 3) reducing the burden of anti-growth state and local income taxes.