Regulations—The Hidden Tax

   Do not think about, write about or deal with  human behavior without determining the effects of incentives.

    Of all the tentacles of government which strangle the interactions of people trying to create wealth, regulations are the invisible ones.

   I was speaking with a person yesterday who petitioned for permission to cut down her own tree. It’s been several years and she has yet to hear. Good times.

Regulations: the tax you don’t see   
By: Lawson Bader and Ryan Young   

Government spending—everybody’s talking about it. But unlike the weather, everyone wants to do something about it. Last week, House Ways and Means Committee Chairman Dave Camp (R-Mich.) released a comprehensive tax reform plan. This week Rep. Paul Ryan (R-Wisc.) made headlines by questioning the government’s efforts to tackle poverty, and the following day, President Obama introduced his $3.9 trillion budget proposal. There is another area where government grows in the shadows, which in many ways, hides government spending and taxation – through regulation.

The federal government spent roughly $3.5 trillion last year, but federal regulations impose an annual economic burden of more than $1.8 trillion. And to be clear, this number is an understatement because the vast majority of rules are not required to report their costs.

One reason this gets so little attention is that most regulations are the technical, dry stuff that most people don’t care about until it affects them. For example, the business owner who is forced to spend thousands of dollars to move light switches to comply with Occupational Safety and Health Administration rules. Or the land owner who cannot build on his property because there’s a rare species of salamander also living there, lest he fall afoul of the Endangered Species Act.

Another reason is a lack of transparency. Many headline-worthy regulatory stories stay buried in difficult-to-access government documents, or are never disclosed at all. By way of contrast, in Congress, legislation is at least subject to public hearings and open floor debate. Lawmakers’ votes are a matter of public record that voters can take into account. Regulatory agencies face no such scrutiny.

Government agencies are only required to look at the costs and benefits for a small minority of their rules. In fiscal year 2012, the Office of Management and Budget (OMB) provided cost-benefit analyses for 14 out of more than 3,500 rules—less than one half of one percent. Over the last decade, only 126 rules out of more than 35,000 received full cost-benefit treatment.


    Since government employees do most of these “studies”, guess what they’ll find; the benefits outweigh the costs. We’re so necessary, we’re well worth the price the taxpayers unwillingly pay.

One could argue this is all by design. It is easier for policymakers to hide unpleasant or unpopular policies from the public by regulating instead of legislating, and we have seen this in practice. Last year, Congress passed, and the president signed, 65 bills into law. Meanwhile, agencies issued 3,659 regulations, which also have the force of law. That is a ratio of 56 regulations for every law.
This lack of transparency must end, and fortunately, there is some good news. The House recently passed a number of transparency bills as part of Stop Government Abuse Week.

One reform would expand OMB’s review authority. Currently, OMB can only review rules from the 17 cabinet-level agencies—out of more than 60 rulemaking agencies in total. That would improve the number of rules receiving the full cost-benefit treatment.


    A law to have government employees investigating other government employees. That will produce truth by the bushel.

Another reform would require the semi-annual Unified Agenda of Federal Regulations, which compiles rules in various stages of the pipeline from every rulemaking agency, to be published on time. The agenda is one of the regulatory state’s most important transparency measures, but the last few editions have been published either months late or on the eve of major holidays, attracting little attention.

A third reform would require agencies to publish an annual report card for all of their programs, how much those programs cost, and other basic information that is currently difficult to access. Our organization, the Competitive Enterprise Institute, has put together sample report cards for the Environmental Protection Agency and Federal Communications Commission that could serve as a model.
As the President and Congress get down to negotiations over the budget and tax reform, they should keep the hidden tax and costs of regulation on their agenda. These reforms, which have already passed the House, would represent a step in the right direction if they can make it past the Senate and the president’s desk. As always, though, there is more to do.


    Once government starts, it has a life of its own. Government employees sense they need to put on a show and they put on a show. One of the ways is to multiply their worth is by multiplying their power. Q.E.D.

Government Job or Respect–Which’ll It Be?
Cheerio and ttfn,
Grant Coulson
Author, “Days of Songs and Mirrors: A Jacobite in the ‘45.”
Cui Bono–Cherchez les Contingencies


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