It’s been an interesting couple of weeks in Nebraska on the occupational licensing front. Yesterday was particularly interesting. My colleague, Laura Ebke, testified yesterday in support of LB1187 introduced by Sen. Andrew LaGrone to allow for universal recognition of occupational licenses held in good standing in other states for individuals coming to Nebraska to work.
This bill is a big deal for Nebraska. Arizona passed this same bill last year – the first in the country. This is an opportunity for Nebraska to again be a national leader on the occupational licensing front. Other states also want to be national leaders. Our neighbors Iowa, Missouri and Kansas have introduced this legislation in 2020.
I can think of no reason that common sense shouldn’t prevail here. If I have been working as a licensed professional in another state, I’ve held my license in good standing, and I decide to move to Nebraska to work, why shouldn’t the state grant me a license?
Completing education hours and taking tests are great, but in all honesty, I can think of no better teacher than good old-fashioned work experience.
It was a blatant protectionist parade by the opposition. One testifier said that Nebraska’s standards would make him inclined to believe that 15 years of work experience would be needed to work in Nebraska as a licensed geologist. 15 years!! Essentially 10 people testifed saying this bill was a bad idea. That by passing this bill, the safety and welfare of Nebraskans would be jeopardized.
What I ultimately heard was this, “Our standards in Nebraska are high. Your professional experience and license in good standing in another state doesn’t matter. We do not welcome workers from other states.”
My first career was as a dietitian. I recall that doctors and other health professionals would look at the lab coat I wore and ask, “What do all of those letters mean?” No one other than those in my own profession knew what “RD, LMNT, CNSC, CSO” meant. 13 letters. That’s more letters than the letters making up my first and last name. In fact, one doctor I worked with would refer to the embroidery on my lab coat as “alphabet soup.” My knowledge and professional abilities were due to work experience, not due to the 13 letters behind my name.
I hope yesterday’s LB1187 hearing was an eye opener for the committee. I hope they decide to be friendlier to Nebraska’s workers than the protectionists were.
Senators in the Revenue Committee are taking a look at LR300CA, a proposed constitutional amendment that would replace virtually every tax in Nebraska with a tax on consumption. A proposed amendment to the resolution would spare the state’s gas tax, but otherwise end local property taxes, state income taxes, and much more.
In exchange, Nebraskans would have to pay a sales tax on new goods or services. In Nebraska and most states, the majority of purchases are currently exempt from sales tax, leading many to wrongly believe the sales tax is only intended to fall on luxuries. It isn’t and it doesn’t.
This whole discussion about replacing major taxes with a consumption tax may feel very speculative, especially since it would make Nebraska the only state without a real property tax.
But the idea of a broad-based consumption tax itself is far from unprecedented and could be used for either conservative or progressive policy ends.
Most countries today have Value-Added Taxes (VAT) that are collected on a wide range of goods and services, and the tax rates imposed on consumption internationally are generally much higher than those that can be found in the United States.
Germany, for instance, collects a 19% VAT on most goods and services, which is actually on the lower side for the European Union, where rates can be as high as 27%. While some countries do exempt the sale of groceries from VAT, the “reduced” German grocery tax rate is 7%.
Such a rate on groceries would be controversial if proposed in Omaha for example, where 7% is the current combined sales tax rate on things like utilities, household goods, nonprescription drugs, and motor vehicle sales.
However, just a few hours from Omaha, residents of South Dakota and Kansas pay comparable or higher tax rates on groceries than the volks in Germany.
In conservative-leaning South Dakota, the sales tax is collected on most goods and services, and those revenues are used to forgo taxes like the state income tax and local personal property taxes.
In progressive-leaning Hawaii, the state’s roughly 4% General Excise Tax is collected on absolutely everything Hawaii residents buy, from groceries and medical care to business inputs. Although property taxes in Hawaii are low, income taxes are high, and the overall tax burden in Hawaii is among the country’s highest.
To me, the importance of LR300CA is that it gives Nebraskans a chance to ask what we would do with our tax system if we were to start over, and what role consumption tax should play.
Given that our sales tax is based on an early-20th century economy that no longer exists, one can hope we’d at least do some things differently.
Alaska is currently looking at a new tax system, too. Oil revenue was such a substantial factor in public finance that the state does not levy a state sales tax or personal income tax, though local property taxes are still a fact of life in populated areas of Alaska. Now, with volatility in the energy sector, they are seeking more sustainable revenues.
In a new report, the Tax Foundation offers an example of how much revenue Alaska could raise if policymakers implemented a consumption tax similar to the kind envisioned in LR300CA, as well as with a more typical, narrow sales tax.
If Alaska lawmakers wanted to collect a sales tax on almost everything (the few notable exceptions are at the bottom of the chart), a rate of 3.1% would be needed to raise $1 billion. If lawmakers were satisfied with raising half as much, they could tax goods and services at 1.6%.
Even in less-populated Alaska, these are not extraordinary figures. You can’t pay for everything people might demand of state government for $500 million or even $1 billion.
But the chart is helpful for showing how a broad-based consumption tax can collect a significant amount of revenue without making a major difference in prices. Conversely, the more policymakers rationalize away reasons taxpayers shouldn’t pay the sales tax on certain purchases, the higher the rate has to be.
In attempting to replace most other taxes, LR300CA may require a higher tax rate than Nebraskans would be comfortable with. But that doesn’t mean the consumption tax approach couldn’t be used in a different way, to make the process of paying taxes less impactful on daily economic life in Nebraska.
With broad bases and low rates, taxes can become less of a factor in deciding whether it’s worth working or investing more, or deciding what you should or shouldn’t buy, or whether a property is worth owning or improving.
It also seems that a larger conversation about consumption tax is overdue nationally, even if the conversation results in deciding the status quo is OK.
Whether you want the United States' tax policy to more closely resemble South Dakota or Sweden, politicians can’t sustainably fund all the promises they’re making without a stable base of revenue that everyone pays into.
This op-ed, posted recently in The Hill, suggests that licensing is not just about reducing "red tape"--it's also about giving people real opportunities to lift themselves from poverty.
Licensing laws are barriers that can put your dreams on hold for years. They also make us less safe. Individuals who have made mistakes in the past, served time in prison, and paid their debt to society have difficulty finding work because of licensing laws. On the other hand, states that remove these barriers allow more of the formerly incarcerated to find employment and become productive members of the community, reducing recidivism and making our country a safer place to live.
But it also calls out the silliness of some of our licensing laws, by pointing out the vast disparities from state to state:
The obvious question is whether Wisconsinite hair is uniquely hard to shampoo or Iowan teeth uniquely difficult to clean – there’s no evidence to back up either proposition. It also seems that their neighbors are doing fine without these laws.
By imposing arbitrary rules, Iowa and Wisconsin have given their own residents incentive to take their talents elsewhere.
Many argue that occupational licenses are necessary to protect public health and safety, but as the author suggests:
Supporters argue that the restrictions ensure quality and safety standards. If that were the case, they might be worth it. But even the otherwise regulation-friendly Obama administration admitted in its study that “most research does not find that licensing improves quality or public health and safety.”
The Platte Institute continues to forge ahead and to work with legislators in Nebraska, AND with public policy groups in other states, to break down barriers to opportunity. This week, we'll be testifying on Senator La Grone's LB1187, which provides for "universal recognition" of personal qualification (i.e. education, experience) of those who are already licensed in good standing in another state. In other words, if your kids move away for a while and get licensed in another state, it will be much easier for them to return to Nebraska in a few years if they want to!
Not too long ago, removing barriers for Nebraskans through major reforms to job licensing laws was mostly just an idea.
The Nobel Prize-winning economist Milton Friedman began to sound the alarm about the growth of occupational licensing in state legislatures over 50 years ago, and for most of that time, the problem became worse as the idea of reform sat in books, collecting dust.
While there were certainly unsung pioneers for licensing reform in communities across the country, the issue did not gain major national attention until 2015, when the Obama Administration published a report calling for states to rein in licensing laws that were making it harder for Americans to create more businesses and better jobs.
When the Nebraska Legislature unanimously passed a bill to eliminate licensing for natural hair braiding by then-Sen. Nicole Fox, I had hopes that lawmakers would begin to question other licensing laws that were excessive.
Since then, the Nebraska Legislature has supported licensing reforms reducing barriers in more than 15 career fields and has adopted one of the country’s first comprehensive licensing review and reform laws.
It’s remarkable how far the state and country have come on this issue over the last four years, as today’s Omaha World-Herald editorial demonstrates. The piece also discusses how changes we’ve worked with many Nebraskans to advance are influencing the way lawmakers look at regulating professions.
We’ve gone from being a state that actually turned away people wanting to come work and start businesses here to being within striking distance of adopting Universal Recognition legislation that welcomes workers from all over the country.
There’s still an enormous amount of work to do, and the debates related to job licensing reform are never as easy as you would expect. But given the many Nebraskans we have had the chance to help in recent years since beginning this effort, I am excited to see how many more opportunities we can create by continuing to move this issue in the right direction.
An article published by Reason Magazine today points out the insidious nature of many states' occupational licensing frameworks.
The sting, according to Patch, saw sheriff's deputies pose as homeowners seeking handymen on social media to do jobs that required licensure. These unsuspecting handymen would be lured to one of five homes, where undercover deputies filmed them performing or agreeing to perform prohibited tasks like painting or installing recess lighting.
Painting? Does anyone question the wisdom of a licensing scheme that doesn't let people hire someone to help with painting their walls unless they're a licensed painter?
Personally, I'd think that law enforcement would have better things to do than to entrap people who are trying to earn a living by providing a service that someone is seeking. The best way to stop this silliness, though, is to significantly reduce the scope and power of occupational licenses--getting rid of those that don't make sense, and letting the free market work!
When I was running for the Legislature (both times), property taxes where high on peoples' minds. I tried to listen to their concerns, and some comments I heard while watching the legislative coverage several days ago (and then again today) reminded me of some of the things that I'd heard, and the difficulty that I had answering them.
The Founders of our country declared their independence and created a republic that would try to ensure that citizen voices would be heard. They took seriously the notion of "no taxation without representation."
All that said, they acknowledged the need for some sort of revenue generation, because the cost of doing those things that the citizens expected of government was more than "zero."
Fast forward to 2020. Consider the list of things that you and your neighbors expect some level of local government involvement in. Here's a quick list to get you started:
These things are all paid for--at least in part--by local property taxes and fees.
When I would talk to landowners, I'd often hear about how high the school portion of their tax bills was. A common complaint: "why do my taxes keep going up for schools, when I haven't had any kids in school for 25 years? Why should I have to pay to give these city kids individual computers?"
Of course the savvy (and feisty) city resident with kids in the school would respond with something like this: "Farmer A, you went to a public school that someone else paid for, and so did your kids. Education is important to a free society. And I never drive on gravel roads, and certainly don't drive heavy equipment over those bridges that MY county property taxes pay for and you take advantage of--and don't you come into town and drive on the city streets that MY property taxes are paying for?"
This is a problem, because we all have something that we see the government doing, which we don't take advantage of, and we wonder why OUR taxes have to pay for it. That doesn't seem fair that our hard-earned dollars are paying for things that we don't use, does it?
And that's where I always asked people to step back, and take a breath. To list those functions that they thought that the government should take on in the world. Most people, I found, bought into the notion that there are certain "collective goods"--roads, schools, bridges, and other infrastructure--that there are some basic services best planned for and provided for by a governmental entity, and they also understood that taxation of some form was probably the only way to fund those things. But they also didn't think that the taxes they paid toward those collective goods were FAIR. That always reminded me of the saying that "the only fair tax, is the one someone else pays."
There is, of course, a real answer to our tax woes--and it doesn't come in the form of raising taxes on someone else. Rather, it comes in the form of taxpayers taking seriously their roles, and engaging their elected representatives at all levels. And, it requires taxpayers who are engaging to offer alternatives to the government paying for so many things--because as long as we expect the services from the government, we're all going to be paying for it in one way or the other.