The Hidden Tax: Regulation

We see what Uncle Sam makes us pay every April. But a new edition of an annual report shows there’s an insidious fee we pay on a daily basis.

We all know what last Monday was. As many of us paid Uncle Sam’s toll — mine was almost a wash, which worked out about how I wanted it — one had either a sour mood knowing that Fedzilla took more of one’s hard-earned salary or that giddy feeling of having absconded with free money because a refund was due. (In many cases, of course, that was just the money loaned to Beltway bureaucrats — interest free! Try finding a bank who will give you those terms!)

Yet we forget there’s a hidden tax which gnaws at our pocketbooks and the economy at large every day. It was pointed out by the Competitive Enterprise Institute in their “Ten Thousand Commandments” report, released on Tax Day.

Regulations cost $1.75 trillion in compliance costs, according to the Small Business Administration. That’s greater than the record federal budget deficit — projected at $1.48 trillion for FY 2011 — and greater even than all corporate pretax profits. Says report author Wayne Crews, CEI’s vice president for policy:

Trillion-dollar deficits and regulatory costs approaching $2 trillion annually are both unsettling new developments for America. … Every year, the federal government blows past previous deficit, debt, and regulatory burdens with no end in sight. No wonder Americans are fed up with Washington.

Just think of the handicap that sucking over $1 trillion annually out of the national economy places on job creation, for regulations that normally have little to do with safety but a lot to do with selecting winners and losers. There’s a school of thought out there which believes that big business (and by that I mean Fortune 500 multinational corporations) is in bed with government to promulgate new regulations in order to discourage competition — a sort of trust-busting in reverse. Since start-up businesses have great ideas but little capital behind them, creating a maze of red tape they need to navigate before they can begin making their mark tends to discourage competition.

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Editor’s Note: This excellent piece was authored by local writer / blogger Michael Swartz.