Across the country, people seeking work in harmless occupations, including barbers, cosmetologists, dental hygienists, and even frog farmers, are forced to spend thousands of dollars and otherwise productive hours complying with regulations. The cost of state-imposed regulations in California alone was recently estimated at nearly $500 billion. Federal regulations have been estimated to cost $1.75 trillion per year, which is roughly 14 percent of total national income. All of these incredibly costly regulations slow economic activity and prevent the creation of jobs and wealth. Unfortunately, efforts to rein in excessive regulations have proven inadequate.
The fundamental problem is that government has little reason to stop overregulating because it loses little or nothing from doing so. But there is a powerful way to give government the missing incentive it needs—the regulatory tax credit. This credit would allow taxpayers to reduce their taxes in an amount equal to the cost of complying with excessive regulation. That single change would force policymakers to carefully consider the costs of new regulations and ensure they are truly designed to protect public health and safety.
The regulatory tax credit would also be a powerful job-creation tool. By discouraging overregulation and the costs associated with it, businesses would be freed to invest and hire. In today’s tough economy, the regulatory tax credit cannot come soon enough.