The Leaflet – The Future of State Tax Policy

Published October 11, 2012

Earlier this week the non-partisan Tax Foundation released its 2013 State Business Tax Climate index. This must-read report allows elected officials to see how their states stack up in terms of creating a tax system that is appealing to business, and thus likely to attract job-creators to the state.

According to the report the 10 highest-ranked states this year were: Wyoming, South Dakota, Nevada, Alaska, Florida, Washington, New Hampshire, Montana, Texas, and Utah. The report notes, “Many of these states do not have one or more of the major taxes, and thus do not have the associated complexity and distortions.”

In 2012 states such as Kansas, Maine, and Michigan passed significant tax reforms that will make their states more competitive moving forward. Many other states considered proposals to phase out their individual or corporate income taxes. Other than Illinois and California, most states wisely moved in the direction of cutting taxes, reducing spending, and managing government debt.

With the 2012 election less than a month away, what is the likely future of budget and tax policy for the states? In August, at The Heartland Institute’s 2012 Emerging Issues Forum, a distinguished panel of experts discussed just that question. They shared their thoughts on how states can create a better business tax climate and the roadblocks to such reforms.

You can watch the video of that panel online and also check out The Heartland Institute’s “10 Principles for Improved Business Climate.” Heartland has some of the country’s leading experts on these issues. If you have any questions about improving your state’s business climate or would like an expert to come to your state, please contact me at [email protected].

This week’s edition of The Leaflet features research and commentary addressing VoIP deregulation, Texas pension reform, uranium mining, San Antonio’s Pre-K proposal, Idaho Medicaid expansion, and the budgets put forth by Paul Ryan and President Barack Obama.


John Nothdurft
Director of Government Relations



Lead Story

Research & Commentary: Voice over Internet Protocol Deregulation

A product that is quickly changing the telecom industry and how people communicate is voice over Internet Protocol (VoIP) calling, where voice and multimedia communication are conducted and transmitted over Internet Protocol (IP) networks, such as the Internet. In this Research & Commentary, Senior Policy Analyst Matthew Glans examines VoIP calling and deregulation, saying states should consider deregulating VoIP services.

VoIP’s rapid expansion has made it a target for increased regulation. Currently, VoIP is regulated as an “information service,” which means it is not subject to telephone regulations and the associated added costs. In recent years, however, the FCC has imposed several new requirements on the VoIP industry, including disability services, 911 enhancements, phone number portability, and contribution to the Universal Service Fund, which is designed to help pay for phone services for low-income and rural areas.

To modernize their communications regulations and ensure the growth and expansion of their communications infrastructure, several states have moved toward deregulating VoIP and other telecom services by exempting VoIP from the authority of state public utilities commissions (PUCs). By deregulating VoIP, states encourage innovation by removing the legacy rules that hinder telephone carriers. Ensuring price flexibility and lowering regulatory burdens spur competition among telecom providers and give consumers more options and greater access to the next-generation products they want.


What We’re Working On

Research & Commentary: Texas Pension Reform
Finance, Insurance, and Real Estate

Like many other states across the nation, Texas faces tough decisions about the pension benefits it provides its state employees. Although Texas has one of the better-funded state pension systems, it still faces many of the same problems other states face.

Texas’s two largest government pension programs have accumulated a combined unfunded liability of $28 billion. In addition, in many cases the regulators controlling pension funds have overestimated the value of future investments and the rate of return they can expect from the investments held by the pension fund. Texas should follow the lead of other public pension plans and consider lowering its assumed rates of return. In this Research & Commentary, Senior Policy Analyst Matthew Glans examines Texas’ pension systems and explains why the projected rate of return on investments needs to be adjusted.

Both long- and short-term solutions are available. In the short term, per-year pension payouts should be capped at a sensible level, the retirement age should be raised, double-dipping should be eliminated, pension rate of return assumptions should be lowered, and workers should be required to make higher contributions. Long-term sustainability will require Texas to follow the private sector’s lead and switch workers from defined-benefit to defined-contribution systems.

Research & Commentary: Uranium Mining

In this Research & Commentary, Policy Analyst Taylor Smith discusses uranium mining moratoria in states such as Virginia and Arizona and assesses whether the costs outweigh the benefits.

Taylor writes, “Uranium mining has been proven safe to both the environment and public health under current regulations, while accomplishing impressive productivity as an energy source. States should embrace the mining of uranium for efficient, carbon-free production of electricity, rather than ban it or implement additional, unneeded regulations.”

Policy Brief: 21 Reasons Why the San Antonio Pre-K Tax Plan Is a Bad Idea

Heartland Senior Fellow Jeff Judson outlines 21 reasons why San Antonio Mayor Julian Castro’s November ballot initiative to implement a 1/8 cent sales tax to fund a network of early childhood education centers will not work.

Jeff writes, “There are many reasons to question whether such a network, which would operate in competition with existing private and public day-care and preschool programs, is the best or even an appropriate use of taxpayer dollars.”

Research & Commentary: Idaho Medicaid Expansion
Health Care

In this Research & Commentary, External Relations Manager Kendall Antekeier argues the state of Idaho should not expand its Medicaid program to adhere to federal eligibility suggestions. Her arguments are also applicable for other states considering expansion. She writes, “This massive increase in a system that already provides insufficient care will not guarantee better health care access to Idahoans. Instead, it will guarantee longer waiting lines for patients and huge costs for taxpayers.”

Policy Brief: The Ryan Budget vs. the Obama Budget
Budget & Tax

In this Heartland Policy Brief, Senior Fellow Peter Ferrara compares vice-presidential nominee Paul Ryan’s budget plan with the budget plan of President Barack Obama. Peter explains the effects each plan will have on federal spending, taxpayers, the federal debt, and Medicare and Medicaid.

He notes, “The differences between the two budgets are stark. Obama’s budget establishes a future course that exacerbates the current fiscal problem, what I have called elsewhere ‘America’s ticking bankruptcy bomb,’ into an even worse nightmare scenario. Ryan’s budget fixes the problem so it doesn’t eat alive the United States’ world-leading standard of living.”

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Heartland’s Emerging Issues Call

Topic: What Does the Election Mean For the States?
Wednesday, November 7, 2012,

1:00 PM EST/12:00 pm CST


Phone number: 312/445-3641
Pin: 37661

RSVP by emailing Robin Knox at [email protected]



Policy Newspaper 


The October issue of FIRE Policy News reports the Obama administration has restructured terms of the federal government’s bailout of Fannie Mae and Freddie Mac. The administration made its move without Congressional approval.


Quick Hits 

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Poll: North Carolina Voters Support Charter Schools, Vouchers





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