Want Reform? Look to the States, Not the Feds


EspañolA chill is in the air in the US capital on this first week of the year, and it has nothing to do with winter finally taking hold in Washington after a warm, beautiful December. It’s coming from the seemingly frozen halls of a gridlocked federal government, after the press mocked Congress for one of its least productive years in recent history. I’ll leave it up to you to decide if that’s a good or bad thing.

Federal politicians are busy fighting each other over culture-war issues and posturing before voters prior to the 2016 presidential election. Meanwhile, most state legislatures are gearing up for what looks to be a productive year addressing a broad range of issues that are more tangible to normal Americans. While there will be far too many changes to list here, there are a few positive trends in the states that are worth noting.

Federal tax reform has long been a policy mirage. It seems so close, so real, but any time someone tries to get closer, it turns out there was never anything there at all. In the states, tax reform is no mirage. While sometimes politicians promise what they can’t deliver on reform, even solidly Democratic states regularly seek to make the tax climates better.

In 2016, that trend will continue. A big theme will be simplifying taxes which bring in minimal revenue but cost lots of money to comply with, such as taxes on business machines and other such “capital stock” taxes.

While tax reform happens nearly every year, substantial regulatory and criminal justice reforms do not. Like taxes on businesses, states are realizing that laws that make it harder for the working poor to scrape by are laws that should be repealed. Even progressive legislators are coming to understand that choking entrepreneurial dreams with red tape hurts the state.

On the regulatory front, expect lots of small changes to legalize or deregulate activities that appeal to changing consumer sensibilities. In an age where people are more likely to check a Yelp business rating than seek out a company’s professional license, laws that cartelize industries in the name of consumer protection are on the chopping block.

These include famous examples, such as taxi regulations falling after pressure from Uber, and rules governing the craft brewing of beer. But there are also instances from a number of other economic sectors.

Expect to see state legislatures debate rules governing selling home-prepared food and liquor, occupational licensing laws, and those governing childcare provision. On each of these, the burden falls squarely on the nation’s poor, and legislators know that. Beyond this, we should also see some states make changes to allow innovative business models, such as accommodating companies like Airbnb and Tesla. They will also try to make regulatory space for the rise of private infrastructure projects.

Yet, above all else, this may be a year in which legislatures take up criminal justice reform. 2015 was fraught by tensions over law enforcement, so changes in this field should be popular and are clearly necessary. Reforms to mandatory-minimum sentencing laws will be discussed, as will reforms to police procedure.

The most ubiquitous topic will probably be the expansion of police body-mounted camera mandates, which would be a big step to make law enforcement officers accountable. Reforms like these which increase police accountability should be the most common, but expect some repeals of criminal laws as well.

For instance, this year may see states like Vermont, Rhode Island, or Delaware be the first to legislatively pass cannabis legalization. Between three to five states, meanwhile, are expected to legalize the drug by public ballot in the fall.

Election year gridlock is a fixture of Washington politics. Yet, while the nation turns its eyes toward Iowa and New Hampshire, reform does not stop; it just gets ignored. 2016 looks to be a big year for states to reform both their regulatory rules and criminal justice policies, while state tax reform moves forward at its typical pace.

Faced with inter-state competition, legislators in most states have no choice but to improve their business climate. Unlike their federal counterparts, inaction is not an option. Inaction just means falling behind.

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