Indiana’s Business Tax Climate: Not a Perfect One, But a Good 10

We’re No. 10! We’re No. 10! Not exactly the rallying cry one is used to hearing, but a refrain that deserves more plaudits than usual. Here’s why Indiana’s ranking in the Tax Foundation’s 2011 State Business Tax Climate Index is noteworthy:

  • It’s not easy to make substantial improvements in this area. Indiana has ranged between No.12 and No. 14 over the last five years
  • The top eight seemingly head the list by default as they do not impose one of the big three taxes (sales, income or corporate income). So, without too much of a stretch, you could say Indiana is second on the list
  • We’re far away from the bottom 10; in order from No. 50, that’s New York, California, New Jersey, Connecticut, Ohio, Iowa, Maryland, Minnesota, Rhode Island and North Carolina

The Indiana Chamber’s advocacy efforts certainly are contributing factors to the state ranking. Historic tax restructuring in 2002 (including elimination of the inventory and corporate gross receipts levies) is among the Decade of Policy Victories document reflecting major legislative accomplishments from 2000-2009. The Chamber has also achieved success in general property tax reductions and an expansion of a variety of tax credits (good for business, but not earning high marks in this report).

According to the Tax Foundation, the worst tax codes tend to have:

  • Complex, multi-rate corporate and individual income taxes with above-average tax rates
  • Above-average sales tax rates that don’t exempt business-to-business purchases
  • Complex, high-rate unemployment tax systems
  • High property tax collections as a percentage of personal income

Indiana’s rankings in the five categories are: corporate tax index, 21st; individual income tax index, 11th; sales tax index, 20th; unemployment insurance tax index, 12th; and property index, 4th.

Since this tax analysis game is not for the faint of heart, a little more from the Tax Foundation on how it all works.

The methodology of the State Business Tax Climate Index is centered on the idea of economic neutrality. If a state’s tax system maintains a “level playing field” for businesses, the index considers it neutral and ranks it highly. However, each state’s final score depends on a comparison with the other 49 states.

The overall index is composed of five specific indexes devoted to major features of a state’s tax system. Each of these five indexes is composed of several sub-indexes.

Each state’s laws and tax collections were assessed as of July 1, 2010, the first day of the 2011 fiscal year. Newer tax changes are the subject of commentary in an appendix but are not tallied in the scores and rankings.

The Tax Foundation has data charts, further analysis and a full 60-page report. By the way, you have to go west for most of the rest of the top 10 (in order): South Dakota, Alaska, Wyoming, Nevada, Florida, Montana, New Hampshire, Delaware and Utah.

And finally, going into a state budget year that will bring pressure to raise revenues, let’s all keep the vital importance of the tax climate in mind on business attraction and expansion decisions.

Utah May Have Cure for ‘Senioritis’

When I was a senior in high school, my teachers often jokingly accused my fellow classmates and I of having "senioritis" when our motivation seemed to wane. I’m sure they do this with every class but, in their respective defenses, our particular class was exceptionally apathetic at times — like, refusing to cheer at pep rallies apathetic. (Not proud of it, just saying it happened.) I believe "failure to thrive" might be an appropriate medical term to apply. But now it seems the Beehive State may have a cure for these academic duldrums: Eliminate the senior year. The Salt Lake Tribune reports:

Sen. Chris Buttars isn’t talking about dropping 12th grade any more.

Now, he’s talking about making 12th grade optional for those students who finish their required credits early — and some lawmakers are listening to the idea with interest.

"I like thinking outside of the box like this," said Sen. Howard Stephenson, R-Draper, who co-chairs the Public Education Appropriations Subcommittee. "I think it really makes us examine what we’re doing."

Now, instead of trying to eliminate 12th grade, Buttars, R-West Jordan, is proposing the state save up to $60 million by giving students the option of graduating from high school early. Students who finish their high school requirements early are already allowed to graduate early, but Buttars’ proposal would provide more incentives for students to do that and make that option clearer, he said.

Buttars said he’s working on a bill on the concept.

"There are some [students] that really have a great 12th grade, but you talk to 100 kids and their parents, and I believe the majority of them will say, ‘Well, my kid didn’t do much in the 12th grade,’" Buttars said. "Everybody wants to talk about change … But to tell you the truth, they’re scared to death of it."

So what do you think? Cerebral move to save money or is it costing students valuable education time? Shouldn’t we be pushing more time in the classroom, not less? And what about the point made in the article about the burden this puts on higher education in the state? Let us know your thoughts.

Feds See Increase in Six-Figure Salaries During Recession

So your business may very well be feeling the pinch these days. In the federal government, however, it seems business, and salaries, are booming. USA Today recently examined the situation that has one Utah Congressman up in arms, saying "There’s no way to justify this to the American people. It’s ridiculous." The USA Today writes:

The number of federal workers earning six-figure salaries has exploded during the recession, according to a USA TODAY analysis of federal salary data.

Federal employees making salaries of $100,000 or more jumped from 14% to 19% of civil servants during the recession’s first 18 months — and that’s before overtime pay and bonuses are counted.

Federal workers are enjoying an extraordinary boom time — in pay and hiring — during a recession that has cost 7.3 million jobs in the private sector…

Key reasons for the boom in six-figure salaries:

Pay hikes. Then-president Bush recommended — and Congress approved — across-the-board raises of 3% in January 2008 and 3.9% in January 2009. President Obama has recommended 2% pay raises in January 2010, the smallest since 1975. Most federal workers also get longevity pay hikes — called steps — that average 1.5% per year.

New pay system. Congress created a new National Security Pay Scale for the Defense Department to reward merit, in addition to the across-the-board increases. The merit raises, which started in January 2008, were larger than expected and rewarded high-ranking employees. In October, Congress voted to end the new pay scale by 2012.

Paycaps eased. Many top civil servants are prohibited from making more than an agency’s leader. But if Congress lifts the boss’ salary, others get raises, too. When the Federal Aviation Administration chief’s salary rose, nearly 1,700 employees’ had their salaries lifted above $170,000, too.

In the article a government affairs director for the Federal Managers Association contends, "the federal workforce is highly paid because the government employs skilled people such as scientists, physicians and lawyers," adding that federal employees make 26% less than private workers for comparable jobs.

What do you think? Is this government spending careening out of control, or are these salary increases just?

Overhauling Medical Malpractice Laws the Right Thing to Do

Malpractice changes have been ignored, for the most part, in the health care reform discussion – now there are numbers to back why this needs to be a part of the solution.

The Congressional Budget Office (CBO) recently released data estimating government spending on programs such as Medicare, Medicaid and the Children’s Health Insurance Program would decrease by $41 billion over a 10-year period with proper reforms. The reason:  Physicians would no longer overuse tests as a way to protect themselves from lawsuits.

Changes in the malpractice system would also cut national health care spending by 0.5% a year ($11 billion in 2009). No, that doesn’t solve all the problems, but trying to fix the lawsuit-happy world we are living in is a step in the right direction.

CongressDaily reports the CBO’s analysis is based on a few reform factors such as capping noneconomic damages at $250,000 and punitive damages at $500,000. It also calculated the numbers based on a one-year statute of limitation for adults and three years for children from the time the injury is discovered.

A few senators rightly shared their support for reform (and dismay for dawdling Democrats), CongressDaily shares:

"This is an important step in the right direction, and these numbers show that this problem deserves more than lip service from policymakers," said Sen. Orrin Hatch, R-Utah. "Unfortunately, up to now, that has been all the president and his Democratic allies in Congress have been willing to provide on these issues." Hatch had requested the updated analysis from CBO.

Senate Finance ranking member Charles Grassley and National Republican Senatorial Committee Chairman John Cornyn of Texas also expressed disappointment that Democrats have not cracked down on medical liability issues. Cornyn urged senators to "take account of the CBO’s objective numbers and the experience of Texas and other states where healthcare access and affordability have been improved by setting reasonable limits on lawsuits against doctors."

Democrats are reluctant to cap payouts from medical liability lawsuits. But President Obama recently directed HHS Secretary Sebelius to look at ways to make changes to the system that will bring down spending.

CBO’s analysis makes a clear argument that malpractice reform should be part of health care reform discussions. Still, supporters have their work cut out for them based on this outlandish comment:

The findings "reiterate what we’ve always known: that medical malpractice claims have almost no effect on overall healthcare spending," said American Association of Justice President Anthony Tarricone. "The vast majority of empirical evidence suggests that there are only minuscule savings to be found in reforming our nation’s civil justice system."

Too Many Governments … Here and Elsewhere

Indiana needs local government efficiency. It didn’t happen legislatively in 2009, but it will return next year. The Chamber and its allies won’t rest until taxpayer dollars are treated as gold, nepotism and outright fraud become relics of the past and our state moves away from a system that is now nearly 160 years old.

We, of course, are not on an island. A Kansas researcher lists his home state and four neighbors as topping the list in fewest residents per government unit. Yes, they (for the most part) share rural characteristics, but that in itself is not a valid excuse. Paul Soutar writes:

While government efficiency may be a challenge for large rural states, it’s not an insurmountable one.  Utah is very close to Kansas in terms of population and area, with 2,645,330 residents and 82,144 square miles, but has 9,761 residents per general-purpose government.

The difference is not a matter of geography or population but instead the number of governments.  Kansas has 2,084, compared with 244 in Idaho and 271 in Utah.

Read the full story.

Utah Unveils Unique Health Care Option

The Salt Lake Tribune reports on Utah’s new venture into the world of health coverage — the Utah Health Exchange. Some Utah officials are opposing federal health care reform plans so they may experiment with this program on a statewide level (not that federal health care reforms are resoundingly popular in Utah anyhow):

Shopping for your health insurance plan, style, is about to become a reality.

The Utah Health Exchange, a Web site where individuals and businesses can compare and buy health plans, is going live Aug. 19.

A cornerstone of the state’s health reform plans, the Utah Health Exchange marks the beginning of a defined contribution market, portable health coverage — and giving Utahns more of a say in their health care.

Only the second health insurance exchange to be developed in the country — Massachusetts pioneered the first — the Utah Health Exchange was created by HB 188. Signed into law by Gov. Jon Huntsman Jr. in March, it’s one of four health reform bills designed to improve the affordability and accessibility of policies, and make the market more transparent.

The Utah Health Exchange, said House Speaker David Clark, R-Santa Clara, "is one of the seminal moments in that health reform" that will help move the state toward its goal of containing costs and making health care more accessible to nearly 300,000 people.

As part of HB 188, employers will have the option of depositing money into their workers’ health savings accounts — instead of just paying a portion of their premium — allowing them to buy any plan they want.

On its launch day, the Utah Health Exchange will begin enrolling up to 150 small employer groups — those with between two and 50 workers — who intend to offer their workers this option.

Then, in early November, their workers will be able to log on with a pin number and pick the plan they like best. If they don’t elect one, they’ll be enrolled in a default plan chosen by their employer. Their coverage will begin Jan. 1.

"Our hope is it empowers consumers, or patients, to see the system and have skin in the game and make choices that influence the market," said Natalie Gochnour, chief operating officer of the Salt Lake Chamber.

HELP and Health Care on Steroids

The health care debate is underway in Washington. Most experts expect some type of reform to emerge. With that in mind, all need to hope that what is put in place (with this most difficult of issues) is a step in the right direction.

I can’t help but be a little concerned when seeing a comment from Orrin Hatch (R-Utah) that HELP (see below) committee staffers are putting together a plan that is "Massachusetts on steroids." He refers to the 2006 state legislation that requires universal coverage, includes heavy regulation and has proven more costly than anticipated. We’re sure the rhetoric will continue from both sides, but that is certainly not a good sign early in the process.

Now for that HELP, as in Senate Health, Education, Labor and Pensions committee. The acronym doesn’t inspire confidence. Help is needed, but will HELP provide the answers?

2010 Numbers Matter — for the Next 10 Years: Congressional Lines Redrawn

For those politically inclined, the work on the next election often begins before the current one takes place. In other words, while November 2008 was drawing plenty of attention at this time last year, there were at least some looking ahead to 2010. That is especially true when the "next" period ends with the number zero.

The every-10-year-period means a new census, a reapportionment of House seats in Congress and new maps for both legislative and congressional districts. There will be a great deal of time to discuss the politics of drawing the lines. For now, the early projections are in place on which states will be winners and losers in the amount of representation they have in Washington.

The National Conference of State Legislatures has its reapportionment outlook. Remember, they are only estimates at this point, but Indiana’s nine seats appear safe. The state, of course, came up short after the 2000 and 1980 population counts — losing a spot in the House each time. (Indiana once had 13 districts before dropping one each after the 1940 and 1930 censuses).

So who wins and who loses in 2011? The big, big winner, according to NCSL, is Texas with the potential of gaining three seats. The South and West also look to benefit from one additional seat for Arizona, Florida, Georgia, Nevada and Utah.

On the other side, eight states stand to lose one seat each. They are Iowa, Louisiana, Massachusetts, Michigan, New Jersey, New York, Ohio and Pennsylvania.

Side notes: If the estimate holds, California would not increase its congressional power for the first time since becoming a state in 1850. Also, pending legislation would increase the size of the House from 435 to 437 — giving the District of Columbia its first vote and allowing one more state to add a seat. (Utah would gain the additional representative, for now, if the legislation passes this year.)

States Seek Pre-emptive Strike Against Card Check

Companies and employees are rightfully worried about the ramifications of the Employee Free Choice Act — or card check as it is more commonly known. The removal of the secret ballot from the union organizing process benefits one group — union leaders.

If the Democratic majorities in Congress make this a reality, states want a weapon in their arsenal. Utah is the first to place a measure on the ballot that aims to pre-empt the possible changes. The Legislature passed a resolution that would have voters decide whether they want to amend the state constitution to require that the secret ballot elections be maintained.

Gov. Jon Huntsman Jr., who offered his support for the measure as the Legislature debated the issue, says,  "This constitutional amendment would ensure that individuals will be constitutionally guaranteed the right to a secret-ballot for these types of important elections." The resolution will go before the voters in 2010.

Advocates for the measure argue it was needed because of the possibility that Congress will enact the card-check bill.

GOP state Rep. Carl Wimmer, the bill sponsor, adds, "Is the secret ballot under attack? Right now there is a movement going through the federal government that will — regardless of what you’ve heard — do away, effectively, with secret ballots when it comes to employee representation and forming of labor unions."

Several other states are pushing similar efforts. The group Save Our Secret Ballot is working on initiatives to amend state constitutions so that union elections are required to be conducted by secret ballot.

Cheer Up, Indiana: Hoosiers Rank Low in Well-Being Poll

Gallup just released a poll ranking the well-being of America’s 50 states (see criteria below). Good news for those in Utah, who ranked number one, but the news was a little more stark for Hoosiers, as we ranked 45th. On the upside, there are five states even more disgruntled than we are.

Like many reading this, I’m quite interested in public policy, so I looked to see if states with any particular political leanings tended to rank higher than others. Perhaps I could adopt that ideology and become a less angry person, as I’d imagine that to be much cheaper than therapy. But alas, that proved fruitless as I noticed Utah, which is quite conservative, was No. 1; Hawaii, which skews liberal, was No. 2; and Colorado, which was recently labelled as the 2nd most libertarian state in another poll I saw, was No. 4. (Gees, don’t you hate when you actually have to think about things and not just rest on partisan dogmas.)

At any rate, here’s some info from Gallup:

Mapping well-being scores across the country, a clear pattern emerges with higher well-being states located primarily in the West and lower well-being states clustered in the Midwest and the South. Standing out among its high-ranking western counterparts is Nevada, with a slightly below average well-being score and a rank of 38th. Also defying the overarching geographic pattern of well-being are Maryland and Massachusetts, the only two states in the Northeast to rank in the top 10…

Results are based on telephone interviews with more than 350,000 national adults, aged 18 and older, conducted in 2008 as part of Gallup Poll Daily tracking. For results based on the total sample of national adults, one can say with 95% confidence that the maximum margin of sampling error is ±1 percentage point.

Here is the Indiana breakdown for each criteria they used (rank is out of 50 states, with 1 being the best):

  • Well-being: 45
  • Life evaluation: 42
  • Work quality: 45
  • Basic access (to necessities): 29
  • Healthy behavior: 48
  • Physical health: 35
  • Emotional health: 43

Also, this site can tell you how happy your Congressional district is. 

While there is much to be done, the good news is: Indiana has picked up momentum and a national reputation as one of the most business-friendly states in the country, and some economists have claimed Indiana, and its citizens, could be some of the first to emerge once the recession ends.