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This week’s edition of The Leaflet features research and commentary addressing Universal Service Funds, Illinois’ pension system, Minnesota’s millionaires tax, dodging the health insurance mandate with temps, Kansas’s renewable energy mandate, and a Missouri Parent Trigger.
In this Research & Commentary, Senior Policy Analyst Matthew Glans argues public policy should avoid favoring one company over another and instead strive to foster a more neutral, competitive, and undistorted marketplace. Public policy also should be transparent, instead of relying on “backdoor” taxes and complex cross-subsidies as Universal Service Funds (USFs) do.
First established as part of the Telecommunications Act of 1996, the Federal Universal Service Fund was designed to provide telephone service to underserved areas of the country. Soon after, individual states began to launch universal service funds to target underserved areas in their states. USFs use fees applied to telephone bills to prop up weak or inefficient telecom providers that operate in underserved areas and would not survive in the marketplace without subsidies.
As these funds’ original intent has run its course, they have proven to be an inefficient and unnecessary use of taxpayer dollars. As a result, the federal government and several state legislatures have begun efforts to refocus their USFs as mechanisms for expanding broadband Internet access, even though 95 percent of the country already has access to broadband.
The additional expansion would be very expensive, burdening consumers and providers alike and further distorting the telecom market. Using the USF as a model for the broadband expansion is also problematic given the USF’s mixed success in improving telecommunications services. In a study examining the revenues and expenditures of the USF between 1998 and 2008, Scott Wallsten of the Technology Policy Institute found $0.59 of every dollar went to administrative and overhead costs rather than actual services.
USFs are unnecessary slush funds that actually slow telecom implementation and innovation and pale in effectiveness when compared with the private sector’s ability to grow the nation’s communications infrastructure. Eliminating government-created barriers to private broadband investment, slashing excessive telecom taxes, and freeing subsidized areas for market competition are more taxpayer-friendly and efficient ways to expand telecom access.
Public policy should avoid favoring one company over another and instead strive to foster a more neutral, competitive, and undistorted marketplace. Public policy also should be transparent, instead of relying on “backdoor” taxes and complex cross-subsidies as USFs do.
What We’re Working On
Illinois Legislators Let Nation’s Worst Pension System Worsen
Illinois’ government pension system, arguably the worst in the nation, will continue to worsen in the months ahead. Legislators failed in their January lame-duck session to do anything to reform the system, which has a $97 billion unfunded liability that rises $17 million a day. In this article from Budget & Tax News, Matthew Glans examines the efforts by the Illinois General Assembly to reform the states’ pension system and how a model from the privat e sector could be a viable alternative the state could use to bring solvency to the failing system.
Minnesota Gov. Mark Dayton has proposed a new top marginal tax rate for high-income-earners several times. The proposals are designed to target a group Dayton says is not paying its fair share of taxes. Several states, including Hawaii, Maryland, and New York, have implemented taxes on high-income-earners in recent years. In this Research & Commentary, Matthew Glans examines millionaire taxes and their poor record in shoring up state budgets and increasing revenue. Matthew argues that instead of increasing taxes on higher earners, a source of revenue that fluctuates greatly with the changing economy, Minnesota lawmakers should develop spending and tax policies that cut both spending and tax rates. Minnesota’s tax rates are already higher rates than most states’; increasing them any further risks greater harm to the state’s economic competitiveness.
The Internal Revenue Service is warning employe rs to not come up with clever schemes to avoid Obamacare’s employer health insurance mandate. The IRS says it will soon issue “anti-abuse rules” to discourage employers from taking advantage of any “regulatory loopholes.”
A joint report by the Kansas Policy Institute and Beacon Hill Institute estimates renewable energy mandates will cause 2020 electricity prices to be 45 percent above baseline estimates. The report also forecasts the mandate will cost the state 12,110 jobs and $1.483 billion in real disposable income through 2020.
Policy Analyst Taylor Smith says, “Mandating the use of energy sources that otherwise would not be economical to use may lead to an artificial expansion of that industry accompanied by the decline of other industries, all at the cost of consumers.”
Missouri legislators are considering an education reform that has garnered significant national attention: the Parent Trigger. The legislation, first passed in California, has been considered in approximately 20 other states, and state legislators in four states have stated their intentions to propose it in early 2013. Critics charge the measure would turn public schools over to private corporations, removing them from state requirements for public schools and reducing the transparency of how tax dollars are spent.
Research Fellow Joy Pullmann says, “Decades of research have shown private enterprises consistently perform services more completely, less expensively, and with better customer satisfaction than government institutions do.” Joy also says, “Given Missouri’s poor academic performance, particularly in urban school districts, parents and children need all available tools at their disposal.”
Topic: Telecom and Technology Issues
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Phone number: 312/445-3641
RSVP by emailing Robin Knox at [email protected]