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What Does Good Tax Reform Look Like?
Nevertheless, many states – including Kansas, Michigan, and Oklahoma – have seen meaningful changes that will lower the burden on taxpayers. Much remains to be done. A USA Today op-ed by Francis DeLuca, president of the Civitas Institute, explains, “The friends of income tax reform shouldn’t lose hope. Even in the face of continued political opposition, income tax reformers have made tax reform a question of ‘when’ and ‘how,’ rather than ‘if.'” Currently Maine and North Carolina are both considering dramatic tax reform proposals. While both have some good parts to their plans, Maine’s proposal would increase overall tax burdens; North Carolina’s plan appears to be more focused on economic growth. So what does good tax reform look like? As Heartland has recommended in the past, when considering tax reform, it is important to ask whether it adheres to four essential principles of sound tax policy: * Taxes should be applied to a broad base. By lowering tax rates and simplifying and broadening the state’s tax system in a revenue-neutral manner, tax reform can encourage economic growth and make future budgets more predictable for lawmakers. This week’s edition of The Leaflet features research and commentary addressing Maine’s tax reform, the Marketplace Fairness Act, ending too big to fail, solar power in Minnesota, Common Core in Pennsylvania, and access to health care. Respectfully, John Nothdurft
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Research & Commentary: Maine Tax Reform Lawmakers in Maine have proposed a comprehensive tax reform plan that would cut the state’s personal and corporate income tax rates, increase sales taxes, change how property taxes are determined, increase “sin” taxes, and eliminate the estate tax. The bipartisan group of legislators sponsoring the bill, known collectively as the “Gang of Eleven,” claim their proposal would create a net revenue increase of $160 million. In this Research & Commentary, Senior Policy Analyst Matthew Glans examines the reform plan and argues that although several of these reforms are positive, the proposal as a whole represents a significant tax hike that would increase the size of government. He points out, “Maine’s tax rates are already higher than those of its immediate neighbor New Hampshire, and increasing them any further risks additional damage to Maine’s economic competitiveness while failing to solve the state’s budget problems.” He also notes, “Although several of these reforms are positive, the proposal as a whole represents a significant tax hike that would increase the size of government. According to Americans for Tax Reform the Maine tax reform package amounts to a $700 million tax hike.”
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Heartland Daily Podcast: Marketplace Fairness Act In this Heartland Podcast, host Jim Lakely interviews Steve Stanek, managing editor of Budget & Tax News and John Nothdurft, director of government relations at The Heartland Institute, about the recent passage in the U.S. Senate of the Marketplace Fairness Act. If the bill passes the House and is signed by President Barack Obama, it would give states a vast new power over retailers outside their borders, including the imposition of auditing requirements. States would be allowed to create their own unique definitions of how and when items are taxed, increasing confusion for out-of-state sellers. Lakely, Stanek, and Nothdurft discuss all those factors, and more, and look ahead to the prospects of the bill reaching Obama’s desk. Additional coverage of the Marketplace Fairness Act is available on the Somewhat Reasonable blog here.
The federal government’s “Too Big to Fail” policy remains highly unpopular with the public. Previous bank bailouts have proven to be an expensive use of taxpayer dollars and a dubious act of government interference in the market. Sens. Sherrod Brown (D-OH) and David Vitter (R-LA) have proposed new legislation that would use bank capital holding requirements to avert bank failures and subsequent bailouts. In this commentary, Matthew Glans contends that while capital standards can play an important role in minimizing bank failures, the high capital requirements proposed by this bill could harm the financial and banking sectors far more than they help. This proposal would require banks to raise a great deal of cash to cover the new capital requirements, which could lead to a massive sell-off of assets or large cuts in staff. Capital requirements also reduce the ability of banks to lend, which reduces the amount of credit available to business. The Terminating Bailouts for Taxpayer Fairness Act would do little to stop bailouts for companies considered systematically important while reducing the availability of credit and slowing economic growth. Let Markets Decide Solar Use in Minnesota The Minnesota Legislature may have finally agreed on how much solar power the state should be forced to use. According to Minnesota Public Radio, “the Minnesota House and Senate have agreed to an energy bill that includes a 1.5 percent solar energy standard for investor-owned utilities.” Policy Analyst Taylor Smith says, “any percentage of solar generation decided on politics, rather than markets, is likely to have economic consequences. Given how extraordinarily expensive solar power is compared to traditional energy sources, and how it’s expected to be for a long time, it’s unfair to force people to purchase it.” Earlier this year, the Pennsylvania State Board of Education adopted a revised version of the Common Core, which sets education standards for the state’s students. In addition to setting these standards, the revised version of Pennsylvania’s Common Core also will require school districts to provide the state a plan outlining how they will administer the standards. Joy Pullmann, a research fellow for education policy at The Heartland Institute, provided expert testimony on the Common Core this week before the Pennsylvania State Senate’s Education Committee. Let Heartland know if you would like Joy to come to your state to testify on this or another education issue. In her prepared remarks, Joy says, “Education leaders bought a pile of shiny labels for Common Core, which include ‘rigorous,’ ‘college- and career-ready,’ and ‘internationally benchmarked.’ The evidence shows this is simply not true.”
This week’s Consumer Power Report (CPR) discusses the Oregon study on Medicaid expansion and why giving people puppies might be just as effective. Heartland Research Fellow Benjamin Domenech writes, “It seems to me that if you assume the lack of health insurance is what caused people to be depressed, and acknowledge Medicaid doesn’t make people healthier, but having health insurance makes them happier (or at least less depressed), it leads to a troublesome conclusion for the left. Consider: It’s only marginally easier to get an appointment with Medicaid than if you’re uninsured and offer to pay a doctor only $20. So the logical solution, if you actually care about people being healthier and not just feeling less depressed, is to end Medicaid and simply give people the monet ary value of the program to purchase a private health plan. In other words, the answer is cold hard cash for smaller health care costs and a catastrophic plan to ward off larger ones … the central aim of consumer-driven health care.”
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