Deadlines and Licensing Are a Recipe for Disaster

From: Libertas Institute

Most people face arbitrary deadlines in their daily lives. Whether you had a school assignment due on an odd date or had to complete a chore in a certain time frame, these deadlines can become cumbersome.

Unfortunately, arbitrary deadlines implemented via increased government regulation are keeping Utahns out of the labor market. This comes at a time when Utah desperately needs employees to fill essential roles, like those in healthcare left vacant by recent labor shortages. Without these roles being filled, Utah’s labor market will be prohibited from growing at a pace necessary to meet consumer demands.

Often those attempting to become licensed face arbitrary deadlines buried within licensing requirements. These deadlines dictate that a license’s education and experience requirements must be completed either within a certain number of years or no earlier than a certain amount of years.

This time frame unfairly burdens individuals who may have low incomes or large extraneous time commitments. For example, a low-income individual or a mom with multiple kids may need more time to complete the requirements due to not being able to pay for or take time off work for the education requirements within the timeframe.

Under the current system, Utahns could be barred from licensure because they were one minuscule requirement short of meeting licensure requirements in an established given time frame. Would giving this individual another month or week to complete that last hour really harm citizens? Absolutely not.

On the flip side, individuals who do have the means to meet licensure requirements in given time frames are also being punished by this system. If a highly motivated individual wanted to complete a license in an amount of time below the required years to obtain a license they would also be blocked from doing so. The result of this is this individual loses out on the income they could’ve accumulated in their new profession. This can result in monetary burdens that are completely avoidable.

Clearly, unnecessary time restrictions must be done away with. Those hoping to contribute to their communities by entering the workforce must have the flexibility to obtain licenses in a way that does not unfairly burden them. Only when this happens can Utah’s economy and consumers best be served by the workforce.

Delaware’s Mix of Businesses has Changed – Regulations Need to Change

From: Caesar Rodney Institute

Revenues rise again as lawmakers prepare to vote on Delaware’s 2023 budget

From: Delaware Public Media

Delaware gets another revenue boost as lawmakers prepare to finalize the state’s 2023 budget.

The Delaware Economic and Financial Advisory Council added another 89 and a half million to the budget bottom line with its June revenue forecast.

Continued strength in personal income tax and corporate tax revenue fueled latest projected upgrades for both the current fiscal year and 2023.

The latest numbers allow lawmakers to spend up to $6.57 billion dollars next fiscal year.

The budget-writing Joint Finance Committee has finished work on the state’s 2023 operating budget, submitting a nearly $5.1 billion spending plan with just over 378 million in one-time supplemental spending.

That’s well above the $4.9 billion budget and $200 million in one-time supplemental spending Gov. John Carney proposed in January.

Lawmakers need to approve the operating budget – along with the state’s capital spending bill and Grant-in-Aid bill before the legislative session ends June 30^th.

States Whose Unemployment Rates Are Bouncing Back Most

From: Wallet Hub

May’s jobs report showed a slight slowdown in growth. The economy gained 390,000 nonfarm payroll jobs, a decrease from 436,000 the previous month. In May, there were notable gains in sectors including leisure and hospitality, professional and business services, and transportation and warehousing.

Now, the U.S. unemployment rate sits at 3.6%, which is still slightly higher than it was before the pandemic but is far lower than the nearly historic high of 14.7% in April 2020. This overall drop can be attributed largely to a combination of vaccinations and states removing restrictions. It will take more time for us to reduce the unemployment rate to pre-pandemic levels than it did for the virus to reverse over a decade of job growth, though.

In order to identify the states whose unemployment rates are bouncing back most, WalletHub compared the 50 states and the District of Columbia based on six key metrics that compare unemployment rate statistics from the latest month for which data is available (May 2022) to key dates in 2019, 2020 and 2021.

Bill aims to cut real estate transfer tax

From: Delaware Business Times

A new bipartisan bill is seeking to reduce Delaware’s real estate transfer tax by 25%, essentially undoing a state increase from five years ago.

House Bill 358, introduced on March 31 by lead sponsor Rep. Bill Bush (D-Dover), has already garnered 17 House sponsors and 10 Senate sponsors spanning both the Republican and Democratic parties, including both party leaders in the House.

The bill will be first heard in the House Administration Committee, although a hearing has yet to be scheduled.  If enacted, the tax cut would take effect July 1.

HB 358 would reduce the state’s portion of real estate transfer tax back to 1.5% from 2.5%, while local jurisdictions would continue to collect 1.5% of a sale’s value. Seeking to close a budget deficit of hundreds of millions of dollars in 2017, legislators raised Delaware’s realty transfer tax from a longtime 3% on most properties to the current 4% with the state collecting the extra percentage point – in rare instances when no local tax is collected, the state collects 3%.

“Typically, this cost is split between buyer and seller. However, in the current competitive housing market, prospective buyers are often paying the entire tax to convince sellers to accept their offers,” Rep. Kevin Hensley (R- Odessa), who works in the real estate industry, said in a statement.

Rep. Mike Ramone (R-Pike Creek) said that legislators agreed to raise the transfer tax for only two years to cover the budget gap, but that expiration date wasn’t in the final bill, and it continues to be paid on sales small and large.

“Our high realty transfer tax is impacting two groups that can least afford it – millennials and seniors,” Ramone said in a statement. “If we can do something to both facilitate home ownership among young people while giving our older citizens a less costly opportunity to gracefully transition into their golden years, I think we have an obligation to do it.”

A decrease in tax revenue would come at a time when Delaware is seeing booming real estate sales. The state’s independent fiscal analysts board, the Delaware Economic and Financial Advisory Council (DEFAC), estimates that Delaware will pull in nearly $300 million this fiscal year from the real estate transfer tax alone, about 25% more than it did last year. That increase has been spurred along by rising property values across the board, but also by a number of high-value sales, including nearly all of the prior decade’s Top 10 sales, that have contributed millions to state coffers on their own.

Delaware has traditionally ranked at or near the top of all states in terms of its real estate transfer tax, a distinction that has led the state’s Board of Realtors to lobby for a reduction for several years. There are 14 states that have no such tax on property sales, while neighboring states like Pennsylvania and Maryland charge 1% or less on a sale.

According to Long & Foster Real Estate, the median price of a home sold in Delaware as of February was $335,000. HB358 would reduce the transaction cost for the sale of such a home by almost $3,400.

Based on the latest estimates from DEFAC, HB358 would allow homebuyers and sellers to collectively retain more than $100 million annually from the tax cut. DEFAC has projected to end the current fiscal year with a budget surplus of nearly $800 million, which has pushed lawmakers to find ways to return those savings to residents.

One bill that has already received bipartisan support will cut checks of $300 per taxpayer as a direct stimulus. Now HB358 appears poised to make the change that real estate agents have been seeking for years.

“As stewards of the American Dream of homeownership, we are excited about the introduction of HB358. This legislation could make that dream a reality for many families throughout the state. Delaware has the highest state-level Realty Transfer Tax in the nation, and while we pride ourselves on being the First State, this is not a ranking that any of us want,” Susan Giove, president of the Delaware Association of Realtors, said in a statement. “The realty transfer tax can become a major obstacle to homeownership because it must be paid in cash at the settlement table in addition to other closing costs. We believe that this legislation will make housing more affordable for all who wish to buy or sell a home and are grateful to all the sponsors for introducing this legislation at a critical time in the current real estate market.”

US Offshore Wind Jobs are Highly Exaggerated

From: Caesar Rodney Institute

Does Your State Have a Gross Receipts Tax?

From: Tax Foundation

Today’s map looks at which states levy a gross receipts tax, which is often considered one of the most economically damaging taxes. Shifting from state gross receipts taxes would represent a pro-growth change to make tax codes friendlier to businesses and consumers alike, which is especially necessary in an increasingly mobile economy.

Gross receipts taxes are applied to a company’s gross sales, without deductions for a firm’s business expenses, like compensation and cost of goods sold. These taxes are imposed at each stage of the production process, leading to tax pyramiding.

Seven states (Delaware, Nevada, Ohio, Oregon, Tennessee, Texas, and Washington) currently levy gross receipts taxes, while several others, including Pennsylvania, Virginia, and West Virginia, permit local taxes imposed on a gross receipts base. South Carolina converted a local gross receipts tax into a tax on net income (profits) in 2020. Gross receipts taxes gained popularity among states in the 1930s but began to be repealed or struck down as unconstitutional by state courts in the 1970s. Although they have been dismissed for decades as inefficient and unsound policy, they have returned in recent years as states seek to limit revenue volatility and to replace revenue lost by eroding corporate income tax bases.

As the map indicates, states often designate multiple gross receipts rates, typically by industry, to mitigate some of the economic costs associated with these taxes. Businesses and industries with lower profit margins or more stages in the production process—each one taxed separately—are hit harder by gross receipts taxes than are high-margin businesses that are vertically integrated, meaning that more of the work is done in-house (resulting in less exposure to the tax because there are fewer transactions). Differential rates attempt, albeit somewhat crudely, to adjust for these differences on an industry-by-industry basis. Washington’s Business and Occupation Tax has the highest top rate of 3.3 percent, followed by Delaware’s Manufacturers’ and Merchants’ License Tax with a top rate of 1.9914 percent. Ohio and Oregon have flat rates of 0.26 percent and 0.57 percent, respectively.

The tax base and allowable expenditures vary depending on the design of the gross receipts tax. Texas’ Margin Tax allows for a choice of deducting compensation or the cost of goods sold. Nevada allows a firm to deduct 50 percent of its Commerce Tax liability over the previous four quarters from payments for the state’s payroll tax. And Oregon allows a 35 percent deduction for the greater of compensation or cost of goods sold.

Gross receipts taxes impact firms with low profit margins and high production volumes, as the tax does not account for a business’ costs of production as a corporate income tax would. These taxes can be particularly severe for start-ups and entrepreneurs, who typically post losses in early years while still owing gross receipts payments.

These taxes also do not focus on final consumption, as a well-structured sales tax would. They penalize companies that include multiple transactions in their production process, with the tax imposed on each stage of production—called tax pyramiding. Prices rise as these intermediate taxes are shifted onto consumers, impacting those with lower incomes the most.

Gross receipts taxes impose costs on consumers, workers, and shareholders alike. Shifting from these economically damaging taxes can thus be a part of states’ plans for improving their tax codes in an increasingly competitive tax landscape.

The Hottest Job Markets in the Country: What Policies are Driving Americans to These Cities?

From: State Policy Network

In April 2022, The Wall Street Journal released their annual rankings of the best job markets in the country. Top of the list? Not the big cities that may first come to mind. The cities with the hottest job markets are all mid-size, and each is in a different state. They are:

• Austin, Texas
• Nashville, Tennessee
• Raleigh, North Carolina
• Salt Lake City, Utah
• Jacksonville, Florida

What state and local policies are creating jobs and attracting workers to these cities? We sat down with the local policy organization in each of these states to get their take.

Low taxes

As The Wall Street Journal pointed out, Florida, Texas, and Tennessee have no income tax—while North Carolina and Utah have an income tax rate of below five percent. A state with no income tax means people get to keep more of what they earn—an attractive policy for workers that also spurs economic growth.

The Beacon Center of Tennessee, Joh Locke Foundation (North Carolina), Libertas Institute (Utah), Texas Public Policy Foundation, and The James Madison Institute (Florida)—which are based in (or close by) the cities with the hottest job markets—pointed to their state’s income tax policy as one of the main reasons why those cities have seen such enormous job growth in the past few years.

And some of those state think tanks played a role in helping their state reduce or eliminate the income tax. In 2017, through a comprehensive campaign, the Beacon Center helped Tennessee become truly income tax free. In June 2021, the John Locke Foundation played a key role in North Carolina reducing its income tax rate from 5.25 percent to 4.99 percent.

It’s not just their income tax policy that leads to more job opportunities. Low taxes overall are also a key driver of job growth. Overall, the cities with the best job markets have a low tax burden.

Beacon Center’s Director of Policy and Research, Ron Shultis, observed: “Every year, thousands of people across the United States move to Tennessee. While their reasons may vary, many choose to live here due to state-level policies such as the lack of a state income tax, low taxes per capita, and low levels of debt.”

Dr. Robert McClure, president and CEO of The James Madison Institute, added: “Florida boasts responsible fiscal policies, great infrastructure, a reasonable regulatory load, and no state income tax.”

In their 2022 report, “Rich States, Poor States,” the American Legislative Exchange Council noted: “Generally speaking, states that spend less—especially on income transfer programs—and states that tax less—particularly on productive activities such as working or investing—experience higher growth rates than states that tax and spend more.”

Minimal regulations

Small businesses provide jobs for the people in their community. However, burdensome regulations make it hard for business owners and entrepreneurs to open and run a business. States that understand the plight of business owners and work to make it as easy as possible for them to run a business see more growth than states with more regulations. Austin, Nashville, Raleigh, Salt Lake City, and Jacksonville are all located in states with relatively minimal regulations.

These low regulations attract out-of-state businesses and are a big reason why so many companies are relocating to these five cities. Tesla, Space X, Oracle, and Hewlett Packard Enterprise have all moved from California to Texas. Tennessee has seen a similar pattern, with 25 California companies moving to the Volunteer State from 2018 to 2021. Those businesses bring thousands of job opportunities along with them.

The Texas Public Policy Foundation added: “It is no secret that pro-growth policies — low taxes and a light regulatory burden—have propelled population growth in Texas and Florida while the opposite has occurred in California, Illinois, and New York. Elected officials’ response to COVID-19 likely accelerated this trend in 2020, with Florida and Texas netting more than half of the nation’s 1.15 million population increase from mid-2019 to mid-2020.

In Utah, an innovative policy called a regulatory sandbox is attracting entrepreneurs and workers from all over the country. A regulatory sandbox is a legal classification that creates a space where participating businesses won’t be subject to onerous regulations—usually for a limited amount of time.

Pioneered by the Libertas Institute, Utah was the first state to pass an all-inclusive regulatory sandbox in 2021. Sandboxes allow new businesses to develop more easily—which can create jobs and opportunities for communities.

A regulatory sandbox is just one example of a Utah policy that is contributing to job growth in Salt Lake City and beyond. Connor Boyack, the CEO of the Libertas Institute, added:

“While Utah typically ranks well for having a low overall tax burden, good fiscal management, and low business regulations compared to most states, the state is particularly attractive to families who want friendly neighbors, and outdoor playground for all seasons, and a good place to raise their children. Salt Lake City and our surrounding communities boast a very low unemployment rate with high-paying jobs in an environment that supports entrepreneurship and attracts significant capital investment. For anyone looking to prosper, Utah is a great place to be.”

Ample housing supply

An affordable home is becoming out of reach for many middle class and lower income families. To address this problem, many states, including Florida, North Carolina, Tennessee, Texas, and Utah, are adopting housing reforms that increase housing supply and lower costs.

Brooke Medina, vice president of communications at the John Locke Foundation in Raleigh, noted:

“Affordability and opportunity make Raleigh one of the hottest cities in the country. The research, tech, and economic clout Raleigh boasts stem from an extensive talent pool and pro-growth policies that Locke has championed, such as reducing the corporate and personal income tax, creating a regulatory sandbox, a K-12 education environment that is teeming with innovations, and efforts to ensure the housing supply keeps up with population growth. For these reasons, and more, Raleigh is increasingly recognized as a place where individuals, families, and businesses can thrive.”

Logan Padgett, vice president of communications and government affairs at The James Madison Institute in Jacksonville, added:

“Jacksonville is like many of Florida’s major metropolitan areas—booming. More than 800 people a day move to the sunshine state and as south Florida becomes more congested, Jacksonville’s culture, climate, and proximity as a beach city make it extraordinarily attractive as a destination. In addition, it’s size in land mass makes it more amenable to growth.”

Right-to-work state

Another thing Austin, Nashville, Raleigh, Salt Lake City, and Jacksonville have in common? They are all located in right-to-work states.

Right-to-work laws state no person should have to join a union or pay union dues in order to have or keep a job. If a person wants to join a union, they can; right-to-work just ensures they have the freedom to choose for themselves. Twenty-seven states have right-to-work laws on the books. Studies show that right-to-work states attract more new businesses than non-right-to-work states. In addition, workers in right-to-work states enjoy higher incomes than workers in non-right-to-work states.

Ron Shultis, Beacon’s director of policy and research, added: “Right-to-work is one of the reasons—even if you didn’t understand or know what it is—why those people moved here [Tennessee]. It’s what creates the environment for you to be able to get that job, a good house, a lower cost of living. It’s what makes Tennessee attractive for people and businesses.”

Other states can learn from these cities driving job growth and opportunity

The cities with the hottest job markets all have policies that encourage innovation, reduce regulations, and incentivize work. These policies can serve as a model for other states looking to attract more jobs and opportunities to their state.

Kentucky’s big move in the Rainy Day Fund rankings

From: Bluegrass Institute

The progress Kentucky has made establishing legitimate budget reserves received some nice validation last week when the Pew Charitable Trusts reported their FY ‘21 “Rainy Day Fund” state trends. From their Fiscal 50: State Trends and Analysis update:

Rainy day funds, also known as budget stabilization funds, grew in more than two-thirds of states — 35 — during fiscal 2021, according to figures reported to the National Association of State Budget Officers (NASBO). A slightly greater number of states—36—posted increases in the number of days they could run government operations using rainy day funds alone compared with the previous year.

Their Rainy Day Fund Highlights section included:

Kentucky had the greatest increase in days (+51.2 days), followed by California (+40), Colorado (+34.4), New Hampshire (+34), and Connecticut (+27.6).

Pew’s website allows for graphical representations of longer term trends from the data. Look at how Kentucky moved past the 50-state median from FY ‘20 to FY ‘21:

Based upon the FY ‘21 figures, Kentucky ranked 12th among the states with the strongest budget reserves relative to their total spending. (Note from Pew on their metric to compare states: “One way to standardize the size of reserves and balances is to calculate how many days a state could run solely on those funds, even though the scenario is highly unlikely.”)

Frankfort’s arrival at a bipartisan Rainy Day Fund consensus has been impressive. It should not, however, be taken for granted.

For decades, government spending has been the first prerogative in Kentucky’s state capital. Establishing sufficient budget reserves to deal with cyclical revenue fluctuations or to prepare for unforeseeable circumstances hasn’t been a high priority.

This seems to be changing, due in no small part to the leadership of the current chairmen of the legislature’s Appropriations and Revenue Committees.

The next critical task is developing a statutory framework around the budget reserves. It must become more than an account with money tucked away. Instead, the Rainy Day Fund should become a program with clear guidelines on how to manage it, in good times and in bad.