Barry Goodfield is a world-renowned psychologist who lives in the Phoenix metro area. His recognized expertise in non-verbal cues puts him in such demand that he regularly consults with international diplomats. He holds two patents in psychotherapeutic methods. But, if you’d like to give the Goodfield Institute a call for an appointment, as they say in New York, “Fuhgeddaboudit.”
Dr. Goodfield isn’t licensed to practice in Arizona by the state government and in the Byzantine world of professional licensing, he isn’t likely to be. Being licensed in California, he’s caught in a Catch 22. California’s licensing board won’t take the time to fill out Arizona’s lengthy forms and Arizona’s Board of Behavioral Health won’t accept anything else that demonstrates Dr. Goodfield’s lengthy résumé and extensive experience.
Even if Dr. Goodfield were granted a license in Arizona, he would have to practice for a time under the supervision of a licensed Arizona psychologist. Dr. Goodfield is a Senior Professor at Henley-Putnam University in San Jose, California. Given his authorship of three books and other qualifications, it’s Dr. Goodfield who should supervise.
Now that he lives in Arizona, Dr. Goodfield would like to offer his services for free to military veterans suffering from post-traumatic stress disorder. Perhaps he and others like him could prevent the sort of tragedies perpetrated by mentally disturbed youth that we’ve seen lately. Unfortunately, the counter-productive tendency of professional licensing boards to keep new people out of a profession is preventing Arizonans from benefiting from Dr. Goodfield’s expertise.
Clearly, changes are needed in the way we approach government licensing for professionals. First, Arizona should reciprocate professional licensing with all states as long as a professional can demonstrate good standing, whether or not that demonstration is in the particular format a board may prefer. Second, a majority of professional boards’ membership should be people who aren’t part of the profession to ensure that the public interest is represented rather than that of already-licensed professionals. Arizonans are smart enough to do their own due diligence on the people they want to hire for professional services and should have greater liberty to do so.
Goldwater Institute: Six Reforms to Occupational Licensing Laws to Increase Jobs and Lower Costs
Goldwater Institute: Licensing Hurts
Goodfield Institute: About Dr. Goodfield
Congress’s deal to avoid falling over the so-called “fiscal cliff” has dominated headlines since New Year’s Day. That “cliff” was automatic spending cuts that would kick in at the beginning of the year coupled with a number of tax rates (a.k.a. the “Bush tax cuts”) that would expire.
As you undoubtedly know, the deal that was reached raised taxes, but did not decrease spending.
Newspapers have been full of stories about the federal income tax increase on taxpayers earning $400,000 or more ($450,000 for families), bringing the top federal income tax rate up to 39.6 percent from 35 percent. But far from being a tax hike only on the rich, many businesses pay their taxes through the personal income tax code. According to data from the U.S. Treasury Department, at least 67 percent of all income generated by the most common types of small businesses falls into this tax bracket. There is no question that these higher tax rates will translate into fewer job growth opportunities in the U.S. at a time when they are badly needed.
The parts of the deal that sparked the fewest news stories, however, may be some of the most important. Take the changes to the capital gains tax. Although the rate went up to 20 percent from 15 percent for taxpayers earning above $400,000, the 15 percent rate was locked in for everyone earning below that amount. Ten years from now there won’t be any congressional kabuki theater necessary to keep that 15 percent rate. Although not a complete victory, this is a very good policy change.
But the ability of businesses to deduct a larger share of their capital investment as they can now was only extended for a year. This “bonus depreciation” allowance lets businesses to deduct from their taxes an additional 50 percent of the total value of their new equipment purchases, like copy machines and computers. Without the bonus deduction, they would be able to deduct only a much smaller amount.
The good news is that states can help counteract some of the effects of these federal actions. In Arizona, for example, the capital gains tax cuts that were signed into law by Governor Brewer will bring that effective tax rate from 4.54 to 3.4 percent over the next three years. That cut can be phased in faster to at least partly counteract the federal capital gains tax hike on job creation. And any state with an income tax could go even further by eliminating its capital gains tax entirely.
Additionally, a legislature can allow a full 100 percent deduction for equipment purchased by small businesses in their state. Not only would this make a state more competitive in attracting jobs, but it will also add an important bit of certainty to the business plans of employers who aren’t sure what the federal government will do at the end of 2013.
States don’t have to be at the whim of Congress. They can take control of much of their fiscal destiny by reforming their tax codes and showing the feds how to do it right.
Goldwater Institute: State Tax Policy and Entrepreneurial Activity
Entrepreneurs are the lifeblood of innovation in our modern economy. They create opportunities for themselves and jobs for others.
It’s certainly a good idea for a state to create an environment that allows as much entrepreneurial activity as possible. In my Goldwater Institute study, Increasing Entrepreneurship is a Key to Lowering Poverty Rates, I show that there’s a strong link between low taxes and entrepreneurship.
The study builds on research published by the U.S. Small Business Administration and authored by University of Tennessee economist Donald Bruce and Creighton University economist John Deskins. They studied how a number of different tax policies affected the level of entrepreneurship between 1989 and 2001. They found that high income taxes and high marginal income tax rates decreased the amount of entrepreneurship in a state. They also discovered that high rates of entrepreneurship are related to declines in the poverty rate.
My study extends the analysis through 2007 and shows that there is a strong the connection between how much entrepreneurship a state enjoys and the state’s general tax burden (sales tax, personal income tax, and corporate income tax) as a percentage of personal income. As you can see in the trendline in this chart, higher tax burdens correspond to lower rates of entrepreneurship.
How a state taxes matters too. States without income taxes have higher average rates of entrepreneurship than those with income taxes. The average entrepreneurship rate in states without an income tax is 21.7 percent, but for states with income taxes it’s 19.6 percent. That two percentage point difference may seem small but it represents at least a couple thousand new entrepreneurs in the average state.
A state that eliminated its income tax would certainly see an increase in the number of entrepreneurs. This shouldn’t be surprising. Most entrepreneurs and small businesses – sole proprietorships and partnerships – pay their business taxes by filing a personal income tax form each year. Getting rid of the income tax is the best way to directly eliminate one of the big barriers to entrepreneurship.
Thousands of Arizonans are living their dream of working for themselves. It is incumbent on policymakers not to stand in the way of those who would like to share in that dream and start their own businesses. By focusing on reforming the tax code, policymakers can help make Arizona a better, more prosperous, and more entrepreneurial place.
Goldwater Institute: Increasing Entrepreneurship is a Key to Lowering Poverty Rates
Small Business Administration: State Tax Policy and Entrepreneurial Activity
Secret government union collective bargaining is the law in eleven states, including Alaska, Connecticut, Illinois, Iowa, Kentucky, Maine, Nevada, New Hampshire, New Jersey, New Mexico, and Wisconsin. By statute, these states expressly require secrecy in collective bargaining.
Similarly, in Arizona, at least eight major cities keep collective bargaining with government unions in the dark. The secrecy imposed by towns like Avondale, Chandler and Maricopa even expressly prohibit anyone from sharing records of negotiations with elected officials and the news media. Elected officials and the public simply cannot meaningfully check and balance collective bargaining negotiations when they do not oversee them and the law keeps them and the news media blind, deaf and dumb during the process. When total secrecy in negotiations is combined with laws forcing Arizona cities to engage in collective bargaining—euphemistically called “meet and confer” ordinances—government unions are free to deploy maximum leverage in negotiations while hiding from any meaningful oversight.
That leverage has a price. The Bureau of Labor Statistics reports that state and local government employees make nearly 43 percent more per hour on average in total compensation than private sector workers. Even when controlling for similar occupations and skills, a study commissioned by Citizens Against Government Waste found state employees in Arizona make nearly 20 percent more per hour on average than their private sector counterparts.
The presence of government unions and the strength of collective bargaining laws explain a large portion of the pay gap between government employees and private sector employees. Arizona could save $550 million every year in excessive pay to public employees simply by banning government union collective bargaining. But the next best reform involves shining a light on the backroom deal making.
It’s time for public labor unions to conduct their negotiations in the light of day.
Bureau of Labor Statistics: Employer Costs for Employee Compensation
Citizens Against Government Waste: Public Servants or Privileged Class
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