Should USA Eliminate State Governments? The states of the United …

Comment on Business Confidence Eases From High by Narged.

Should USA Eliminate State Governments? The states of the United States have a long and glorious history. Some of them existed long before the Declaration of Independence. From 1776 to 1787 (when the Constitution was signed), the United States was merely a loose federation of states.

Fast forward to today. Starting with a clean slate, would any rational human choose to inject, in between national government and local government, an intermediate level of government with the bizarre mix of powers and lack of powers that our state governments have today? It is true that we aren’t starting with a clean slate, but that is no excuse not to fix what is so badly broken. A constitutional amendment could eliminate this useless and expensive intermediate level of government

The list of reasons to abolish state governments is very long and compelling:

1. State governments attempt to make laws on national issues.

Especially recently, state governments have wasted much time and money legislating laws addressing what are logically national issues. Many of these issues are contentious, but, one way or the other, we need to have a consistent national policy. The definition of marriage, stem cell research, and similar issues need to be decided nationally. It makes no sense for two people to be considered married in one state, but not in another.

The list of other issues that need to be addressed nationally includes

* Immigration policy
* Health care standards
* Allowed medical treatments and drugs
* A person’s relationship with her doctor
* Food safety
* Environmental standards
* Automobile safety and mileage standards
* Voter registration requirements

2. Forced to raise revenue to fund federal requirements.

Authority and responsibility are not matched when states must raise revenues to fund federal requirements in areas such as unemployment benefits and welfare. The same legislators that pass laws need to take responsibility for funding them.

3. Crazy-quilt of sales tax laws.

Sales tax rates vary from no tax to over 10%. Worse yet, the rates vary by county as well as by state. This variation in taxes is expensive to administer, and creates a nightmare for small businesses located in border areas or doing business in multiple states.

Internet and mail order businesses are especially impacted by this crazy-quilt of sales tax laws. States lose revenue on interstate transactions, while small internet and mail order businesses struggle to comply with the laws of many jurisdictions.

4. Crazy-quilt of personal income tax laws.

State personal income taxes vary from no tax to a marginal rate of over 10%.

5. Crazy-quilt of corporate tax laws.

The rates and related regulations for corporate taxes vary widely by state. Further, states often compete to offer tax breaks to entice companies to move from other states. This generally creates a small benefit for the company’s new state, but a large loss for the previous state. The existence of state governments makes it much easier for big business to pay lower taxes and shift most of the tax burden to the people.

6. Competing in watering down consumer protection to attract companies.

Even worse than competing for corporate presence with tax giveaways is the practice of competing for corporations by watering down consumer protection laws. In one early and well known example, in 1981 Citibank moved its credit card operation to South Dakota, specifically because South Dakota law allowed them to charge very high interest rates (and other states aren’t allowed to protect their citizens from out-of-state banks).

7. Property taxes.

Historically, the main function of property taxes has been to pay for local public schools. Returning the collecting of property taxes to local government would be an improvement over collection at the state level. However, basing taxes on property value is a particularly unfair way to compute taxes. Historically, property taxes made more sense when land was visible, but income was easy to hide, but that argument is vastly overshadowed today by the unfairness of property taxes. Changes in the market value of property, either up or down, do not tend to reflect in any meaningful way the owner’s ability to pay those taxes. Corporate and personal income taxes, value added taxes, even sales taxes, are far more fair mechanisms for taxation.

8. Drivers licenses and vehicle registrations.

Drivers licenses, ID cards, and vehicle registrations are another area of inconsistent state regulation. Having these issued by the national government could create a secure system to positively identify citizens, as well as to cut costs and confusion.

Now is the time for a constitutional amendment to abolish state governments. Let the states become federal administrative districts, but without the power to create state laws.

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