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I wish it weren't so, because on an intellectual level I support 'State's Rights' though I generally refer to it as 'New Federalism'.
The benefit from such a policy would be a diversity of options and policies among different states.
The potential downfall of such a policy is a 'race to the bottom' in search of the lowest taxes (and thus the lowest services).
An important part of my support for New Federalism is a demand for a fundamental change in property theory and taxation:
Taxes & Gov't User Fees should recapture the value created by government goods & services. This happens in many ways, but the most fundamental one is through property values:
If I suddenly became the benevolent dictator of, say, Wyoming and suddenly implemented
Universal Healthcare
Free Public Transit
Free and excellent schools, colleges, and universities
Etc. Etc.
People would move to Wyoming for these benefits.
Unfortunately these benefits would have to be paid for.
If I did it through Income taxes, many of the people who would otherwise move there, especially those who wouldn't necessarily need the healthcare, transit and schools, would move elsewhere, taking a portion of my tax base.
If I did it through sales taxes, many of the business that would move there and employ my people would move elsewhere, or not be created. Many of my people would spend so much of there income in taxes that they wouldnt' have disposable income to save or support further commerce.
If i did it through property taxes, many of the buildings that I'd need to house and employ my people wouldn't be built.
If i did it through corporate taxes, many of the employers who might choose my state in which to locate would choose to locate elsewhere.
This is the cause of fear of a race to the bottom; It is also one of the reasons many Federal initiatives are pursued: If everyone must pay social security, no individual state is faced with cutting it or keeping it. However, even with these Federal laws ensuring equality between the states, and thus no race to the bottom, the Nation must compete against other nations. If a wage tax must be paid in the US vs. no wage tax elsewhere, all else being equal, employers will locate elsewhere - fortunately all else is rarely equal when using the US as a comparison.
To avoid a race to the bottom, we must find a source of revenue that can't be hidden, can't be moved elsewhere, and generally can't be avoided. This source of revenue must also increase as government spending is increased.
That source of revenue is ground rents. Currently, when we improve schools, or build a highway, or a subway, or other public investment, landowners in the area receive a windfall increase in wealth. These windfalls cause speculators to bid on parcels, in the hopes of continued windfalls, pricing residents out of homes. However, if the capitalized value of land is captured by public collection of annualized value, the price of obtaining land is negligible. The price of keeping land becomes significant - thus encouraging development rather than idle speculation. Generally, this curbs sprawl in faver of compact, densely developed urban areas: this must be balanced by public greenspace, which fortunately, increases the rents availabe from nearby parcels.
In short, public collection of ground rents creates a positive feedback loop, a 'race to the top', when coupled with good government.
Generally, the objections to such a plan involve fear of taking property from homeowners, even though the average homeowner owns far less than his 'fair share' of land wealth. The few extremely land-wealthy people and corporations certainly benefit disproportionatly for our concern over the retired homeowner. However, we generally have no problem with taking a 15-40% share of an individuals rightfully owned labor. Furthermore, a gradual shift to such a scheme can be coupled with protections for retired persons and those on fixed incomes.
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