Small Business Tax Rankings Released

The “Small Business Tax Index 2017: Best to Worst State Tax Systems for Entrepreneurship and Small Business” ranks the 50 states according to the costs of their tax systems for entrepreneurship and small business.

View an interactive U.S. map of “Small Business Tax Index 2017” results.

Raymond J. Keating, chief economist for the Small Business & Entrepreneurship (SBE) Council and author of the report, said: “While there is much discussion in Congress and the Trump administration about making the federal tax system more competitive, these issues obviously reach down to state and local levels as well. That’s the focus of SBE Council’s ‘Small Business Tax Index 2017.’ Specifically, which states are among the least burdensome in terms of taxes, and which inflict the weightiest burdens on small businesses?”

The SBE Council pulls together 26 different tax measures, and combines those into one tax score that allows the 50 states to be compared and ranked. Among the taxes included are income, capital gains, property, death, unemployment, and various consumption-based taxes, including state gas and diesel levies.

According to the “Small Business Tax Index 2017,” the 10 best state tax systems are: 1) Nevada, 2) Texas, 3) South Dakota, 4) Wyoming, 5) Washington, 6) Florida, 7) Alabama, 8) Ohio, 9) North Carolina, and 10) Colorado.

The bottom 10 include: 41) Connecticut, 42) Oregon, 43) New York, 44) Vermont, 45) Hawaii, 46) Iowa, 47) Minnesota, 48) Maine, 49) New Jersey, and 50) California.

Since last year’s report, several states have made significant tax changes.

Five states – Arizona, Indiana, New Hampshire, New Mexico, and North Carolina – have improved their tax climates by reducing their personal or corporate income tax rates. Other states – such as New Mexico and Tennessee – have scheduled changes that will improve their tax climates for entrepreneurship, business and investment in coming years. Unfortunately, all of the news is not good. Kansas, Maine and New York have made tax changes that are negatives.

‘Lawsuit Lending’ and Asbestos Litigation Bills Expected

statehouse-picLast month the Indiana Chamber reported that a Colorado Supreme Court decision determined that “lawsuit lending” is a loan and will be regulated under the Uniform Consumer Credit Code (UCCC) in Colorado – and that it could impact what happens in the Indiana General Assembly. (Lawsuit lending is the practice of advancing money to a plaintiff/someone involved in an accident in anticipation of winning a lawsuit in court. If the plaintiff is awarded a settlement, the advance must be repaid at considerably high interest rates. If the plaintiff loses the suit, there is no obligation to repay the loan.)

Representative Matt Lehman (R-Berne), recently elected the House GOP Floor Leader, has indicated that he indeed will be filing his annual lawsuit lending bill – though it will look different. Previously the measure was titled Civil Proceeding Advance Payment Transaction (CPAP), which was defined as a nonrecourse transaction in which a person (CPAP provider) provides to a consumer claimant in a civil proceeding a funded amount. However, this year’s version will mirror the language in Colorado. The 2015 language specifically stated that the UCCC does not apply to a CPAP transaction; but his year’s bill (although not yet filed) will place the transaction under the UCCC.

Separately, Rep Tom Washburne (R-Evansville) will be filing a bill regarding asbestos litigation. It’s expected to require a plaintiff who files a personal injury action involving an asbestos claim to provide information to all parties in the action regarding each asbestos claim the plaintiff has filed or anticipates to file against an asbestos trust. The bill’s intent is to provide transparency to asbestos litigation and to discourage a plaintiff from being able to file an asbestos suit against an employer and also file a claim to an asbestos trust.

Colorado Court Decision May Impact Indiana’s ‘Lawsuit Lending’ Battle

10044552As the 2016 legislative session nears, an interesting development occurred in Colorado over an issue that the Indiana Chamber has been working on for the last several years. This week, the Colorado Supreme Court determined that the practice of litigation finance, or more commonly referred to as “lawsuit lending”, was determined to be a loan and subject to Colorado’s Uniform Consumer Credit Code (UCCC).

Lawsuit lending is the practice of advancing money to a plaintiff/someone involved in an accident in anticipation of winning a lawsuit in court. If the plaintiff is awarded a settlement, the advance must be repaid at considerably high interest rates. If the plaintiff loses the suit, there is no obligation to repay the loan.

Proponents of the industry have claimed that the advance is not a loan because there is no recourse if the suit is lost. Opponents (including the Indiana Chamber) believe that this process interjects a third party into the civil justice system and prolongs the settlement process.

The Colorado Supreme Court’s decision puts lower interest rate limits on the advance of these loans. Two companies doing business in Colorado stopped operating in 2010 after the state office that regulates Colorado’s UCCC determined that the state law applies to their businesses. After the two companies filed suit to overturn the regulatory opinion, the state attorney general’s office countersued. The companies were accused of unlicensed lending and charging “exorbitant” interest rates to plaintiffs.

In conclusion, the Colorado Supreme Court wrote: “We hold that litigation finance companies that agree to advance money to tort plaintiffs in exchange for future litigation proceeds are making ‘loans’ subject to Colorado’s UCCC even if the plaintiffs do not have an obligation to repay any deficiency if the litigation proceeds are ultimately less than the amount due. These transactions create a debt or an obligation to repay that grows with the passage of time. We agree with the court of appeals that these transactions are ‘loans’
under the code…”

Attempts to regulate the practice have been unsuccessful in Indiana. Hoosier proponents of the practice have indicated that subjecting finance companies to the UCCC in Indiana or subjecting them to an interest rate of less than 45% will put them out of business, so there has not been language that could bring about a compromise. The Indiana House of Representatives has passed a bill for several years that the Chamber has supported. However, the Senate has sided with the lenders and stifled the Chamber’s attempts to forward our position.

Still, the Colorado Supreme Court decision might be a game-changer in Indiana. It would not be surprising to see legislation introduced that will mirror what happened in Colorado. Last session, a similar measure was inserted as an amendment into a bill that came over from the House. The language was removed on the Senate floor before a vote was taken. Legislation this session that would be tied to Indiana’s UCCC should be assigned to the House Financial Institutions Committee, where it will find support.

Likewise, any bill tied to the UCCC should be sent to the Senate Insurance and Financial Institutions, chaired by Sen. Travis Holdman (R-Markle), where it would most likely find support. However, the issue historically has not been tied to the UCCC and has been assigned to the Civil Law Committee, where Sen. Joe Zakas (R-Granger) is chair. Senator Zakas has not been supportive of the Chamber’s lawsuit lending position.

The Chamber anticipates further debate on this issue as the new legislative session unfolds.

Toll Road Tales: Good News for Taxpayers, Motorists

TReactions were varied recently when the company operating the Indiana Toll Road filed for bankruptcy. A researcher at the Harvard Kennedy School emphasizes the positive aspects of how that deal was structured and focuses on the continually evolving role of each party in such an agreement. Governing reports:

n 2005, two companies came together to form the Indiana Toll Road Concession Co. (ITRCC), which won the right to operate the toll road in exchange for a $3.8 billion up-front payment. The deal limited how much tolls could rise and included a trigger requiring the consortium to expand the roadway if certain congestion benchmarks were reached. The $3.8 billion threw off about $250 million that was used to fund other state transportation priorities.

Like so many other enterprises, ITRCC was done in by the Great Recession. Its financing structure called for large debt payments at the end of the first decade, which proved overwhelming in the face of revenues that didn’t meet projections when the downturn hit and traffic volume fell.

But what’s reassuring is that motorists will see no interruption in service or toll increases as a result of the bankruptcy. The roadway is still subject to the same performance metrics, and there will be no taxpayer bailout. State officials will first try to find a new operator to take on the remainder of the concession deal. If that doesn’t work out, the ITRCC will likely be recapitalized with an altered debt schedule.

In either case, customers will retain the benefits from the $458 million ITRCC has invested since 2006 in road, bridge and pavement improvements and a new electronic tolling system.

While it appears that the Indiana Toll Road deal has succeeded at protecting taxpayers and motorists, that doesn’t mean there aren’t lessons to be learned from the bankruptcy. To maintain a true public-private partnership, governments might want to avoid taking the entire concession payment up front.

Chicago completed a similar deal just before the Indiana Toll Road agreement and couldn’t resist the temptation to use the upfront windfall to plug other holes in the city budget instead of using interest from the concession payment to maintain transportation infrastructure. More recently, public-private partnerships for Virginia’s Pocahontas 895 parkway and Colorado’s Northwest Parkway featured smaller upfront payments but give taxpayers a cut of the ongoing toll revenue.

Licks or Clicks: Take Your Pick

I'll risk showing my age by asking how many remember the advertising phrase: "How many licks does it take to get to the Tootsie Roll center of a Tootsie Pop?" The ads on U.S. television go back to 1970.

I was somehow reminded of that when reading a recent headline that said: "How many clicks does it take to get to state tax information online?" Not quite as exciting or tasty a subject, but there is that alliteration.

The Tax Foundation asked the second question. Indiana was one of five states at the bottom of that list, requiring five clicks in order for a visitor to the state web site to find 2012 individual income tax rates. Three states (Colorado, Massachusetts and Pennsylvania) provided access with only two clicks.

A second query focused more on quantity of information rather than ease of locating. States were evaluated on the availability of 2012 and 2013 tax rate schedules, tax tables and tax forms. Five states had a perfect six score; Indiana was one of 11 with a five out of six.

What does it all mean? One takeaway is that states would be well served to reduce taxpayer frustration at an already frustrating time for many by making tax information available in an easy-to-locate manner. And, anytime you can pull out a 43-year-old Tootsie Pop reference, you have to take advantage of it.

The Tax Foundation has the details.

Ad War Winner is TV Stations in Key States

Combined television advertising spending in the presidential race is on pace to top $1 billion by Election Day. And while you might think you’re seeing more than a few attacks and the occasional "I have an idea" spot here in Hoosierland, we’re actually barely a blip on the radar screen.

Residents in the battleground states are being bombarded. Just last week, the tally came to an estimated $14.3 million in Florida, $13.9 million in Ohio and $9.3 million in Virginia. Colorado and Iowa have also been part of the mix since the summer.

In fact, before the campaign was even in full swing, here were the 10 media markets as defined by most gross rating points (an advertising measure that, in simplied terms, means  reach times frequency) for just July and August.

  1. Colorado Springs
  2. Roanoke-Lynchburg
  3. Richmond-Petersburg
  4. Denver
  5. Des Moines
  6. Columbus
  7. Cincinnati
  8. Cleveland
  9. Tampa-St. Pete
  10. Cedar Rapids

I guess one can always switch the channel, but there’s no guarantee you won’t be "attacked" there as well. Good luck and remember there are only two more weeks to go.

Lack of Leaders Just Not True

In a policy world too often filled with political preferences and partisanship, there do remain outstanding leaders. Governing recognizes some of those public officials each year and reminds all that leadership is not always readily apparent with this World War II story.

Have you ever heard of Ralph Carr? Neither had I until Adam Schrager gave a presentation about him at a Governing event. Carr was governor of Colorado from 1939 to 1943, and from Schrager’s book, "The Principled Politician: the Ralph Carr Story," we learn that Carr was a rising star in the Republican Party until the Japanese attack on Pearl Harbor on Dec. 7, 1941. In the fear and anti-Japanese sentiment that gripped the nation following the attack, Carr was virtually the only politician who spoke out against the internment of Japanese-American citizens. His political career ended soon thereafter.

We hear regularly about the dearth of good political leadership in our time, but it seems to me that the incidence of good leadership is probably about the same now as it was in any earlier age. Sometimes it’s easy to believe that our perception to the contrary is the fault of the media or our modern methods of communication. I think not. There have always been demagogues and unprincipled critics, and their voices were as loud in the public square then as they are now. Then as now, it is difficult to recognize some of the truly great leaders among us until long after the smoke has cleared.

Outstanding public leadership is often shaped by circumstances that we would not want to occur. There is no Lincoln without slavery and the Civil War, just as there is no Ralph Carr without Pearl Harbor and World War II. But more frequently, we are unaware of the many other good leaders among us, the ones quietly doing the work in their own spheres of the world and not engaging in a lot of image-building and branding. In other cases, their names are familiar but we do not recognize their value at the time. Nearly everyone in Colorado and many across the nation knew who Ralph Carr was; they just didn’t recognize that he was right. He never wavered from his support for the civil rights of Japanese-Americans even as he ran for and narrowly lost a race for the U.S. Senate in 1942.

After I heard Schrager’s presentation, I asked him, "Was Ralph Carr a good politician?" After all, maybe a better politician would have trimmed his sails a bit and scooted through the storm to win the Senate seat. After his loss, one Denver newspaper described Carr’s position on the Japanese-Americans as "a fatal blunder." Schrager’s answer to my question? Yes, Carr stood on principle, was ultimately proved right, and although he lost the bid for the Senate, he did so narrowly and, had he not died in 1950, he might well have won another term as governor that year.

There are surely many good political leaders among us now. Sometimes, as with Ralph Carr, it may take a while before we recognize them. We at Governing make it our job to look past the swirling tweets, the pundits’ diatribes and the intemperate blog posts and identify the most effective leaders who are among us right now. We celebrate their accomplishments as our Public Officials of the Year. The fact that the hard part is not finding enough candidates but narrowing the list down to a few tells me that great leadership is no more in short supply than it ever has been.

Hey Indiana, Get on the Bike!

Indiana is home to seven of the 214 U.S. bicycle-friendly communities, according to the League of American Bicyclists. There are only three communities in the platinum grouping. In Indiana, Bloomington is a silver designee, with the following in the large bronze category: Carmel, Columbus, Fort Wayne, Goshen, Indianapolis and South Bend. Governing reports:

The United States is now home to 214 bicycle-friendly communities in 47 states, according to a new list released Monday by the League of American Bicyclists.

Municipalities are evaluated based on their efforts to promote bicycling, investments in bicycling infrastructure and bicycling education programs, the league said in a news release. They must apply to be considered for the list. Localities are also divided into four categories: platinum, gold, silver and bronze.

Boulder, Colo., Davis, Calif., and Portland, Ore., remained the only three communities to earn the platinum distinction on the 2012 list. All three ranked in the top 10 for their percentage of commuters who bike to work, according to the U.S. Census Bureau’s 2010 American Community Survey, as Governing previously reported.

The league also singled out Durango, Colo., and Missoula, Mont., which were moved up from a silver to a gold designation.

More than 7 percent of Missoula’s commuters bike to work, according to the league’s report, well above the national average of 1 percent. The city has recently installed protected bike lanes, added bike path signage and created more bike parking. Durango has constructed more than 300 miles of mountain biking trails and continues to invest in city biking lanes, the league noted in its release.

According to the U.S. Census Bureau, the number of Americans who use bicycles as their primary mode of transportation has doubled in the last decade, up to 730,000.
 

You Were Asking About the First Female Bailiff?

Random info about Wyoming and women (I told you it was random) found in the State Legislatures magazine:

  • The Wyoming Territory (it became a state in 1890) in 1869 was the first to give all women the right to vote. Side note: Women who owned property in New Jersey were allowed to vote between 1790 and 1807
  • Wyoming (known as the Equality State) had the first female justice of the peace, bailiff, all female jury and governor.
  • Neighboring Colorado, however, had the first woman who was elected to the legislature and still has the highest percentage of female lawmakers

Here’s a Vote for Cleaning Up the Rolls

When you read as many reports, studies, analyses and similar materials as I do, it’s difficult to be shocked by many of the facts that emerge. But check out these numbers from the Pew Center on the States regarding voter registration:

  • 24 million vote registrations either invalid or largely inaccurate
  • 1.8 million dead people still listed as active voters
  • 2.75 million who are registered to vote in more than one state
  • 51 million (estimated) voting-age U.S. residents who are not registered

Here’s a portion of the NPR story on the findings.

Election officials say one problem is that Americans move around a lot. And when they do, they seldom alert the local election office that they’ve left.

Ben Skupien, a registered voter who now lives in Northern Virginia, is pretty typical. He has moved repeatedly over the years and says he’s probably registered to vote in about a half-dozen states.

"The assumption, I would think, is that they would do the courtesy of letting the other states know that if you’re registered with a new state, [the old registration] would no longer apply," said Skupien.

In fact, states seldom share such information. The Pew study found that almost 3 million people are registered to vote in more than one state.

Voters also die, which leads to another problem, says Linda Lamone, who runs Maryland’s elections.

"If a John Smith lives in Maryland and goes to another state, say on vacation, and dies," Lamone said, "the law of the state where John Smith dies dictates whether or not the Maryland vital statistics people can share that information with me."

And even when they do — or if a person dies in-state — there’s often a delay before election officials are alerted. It’s also not always clear that the individual on the death certificate is the same one who’s registered to vote. Election officials still have to do a lot more digging to avoid accidentally taking someone off the rolls who is very much alive.

Washington Secretary of State Sam Reed says it’s amazing how many times his state has come across names on the voter rolls that appear to be the same person, but turn out not to be.

"We’ve even had cases, in very small counties, people [with the] same name and same birth dates," added Reed.

He said that has led to inaccurate reports that "dead" people are voting. He admits there have been a few cases in his state where widows or widowers have cast ballots for former spouses, but he said such fraud is very rare.

Still, election officials say it’s important that the public have confidence in the system.

So Washington and seven other states — Oregon, Colorado, Delaware, Maryland, Virginia, Utah and Nevada — are joining a pilot program to share more voter information and other databases, to try to make their lists more accurate.