Commentary: Hidden Costs to Taxpayers of Regulatory Compliance

By Pitts, William | THE JOURNAL RECORD, July 23, 2001 | Go to article overview
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Commentary: Hidden Costs to Taxpayers of Regulatory Compliance


In our state and federal governments there are many hidden taxes, but they pale in comparison to other regulatory compliance costs imposed upon business and the public by their bureaucracies.

President George W. Bush's budget presented to Congress this year totaled an almost incalculable $1.96 trillion.

That amount comes from taxes of all sorts and is for on-budget spending.

Another estimated $788 billion is added to the costs of businesses and the public in the form of compliance with federal rules and regulations.

These costs are equal to about 85 percent of the 2000 individual income taxes estimated at $951.6 billion.

Think about that for a minute.

Nearly half again as much money as the total tax revenues result from federal regulatory compliance requirements. This doesn't include the cost of compliance with state and local government rules and regulations.

Many state regulations are enacted as a result of federal mandates, but additional ones also are imposed.

In fact, state and local entities are subject to federal regulatory compliance costs. This often leads to the need for increased taxes or higher costs for some governmental services that are supplied at their levels.

These regulatory compliance costs are hidden taxes that go unacknowledged from year to year as they grow with each succeeding administration

This appalling aspect of federal regulatory costs is outlined in the 2001 Edition of Ten Thousand Commandments, an Annual Policymaker's Snapshot of the Federal Regulatory State. It is written by Clyde Wayne Crews Jr. for the Washington D.C., based Competitive Enterprise Institute. That is a nonprofit, nonpartisan public policy group dedicated to the principle of free enterprise.

Crews is an adjunct scholar at the institute and director of technology studies at the Cato Institute, where he studies Internet and technology regulation, antitrust and other regulatory reforms. He received his MBA from the College of William and Mary.

To emphasize the urgency of the problem he points out the 2000 Federal Register, where rules and regulations are published, contained 74,258 pages. That was the highest level since Jimmy Carter's presidency. In the Oklahoma Register for 2000, there were more than 6,000 pages, most of which were devoted to rules and rulemaking.

Crews explains that the number of pages doesn't necessarily allow one to conclude whether actual regulatory burdens have increased or lessened.

By isolating those pages applying specifically to final rules, it is much more informative. Through this procedure he determined that pages in the Federal Register devoted to final rules have increased 46 percent since 1991. He attributes some portion of this increase in 2000 to last-minute rules established by outgoing President Bill Clinton.

Federal agencies issued 4,300 final rules in 2000. This was a drop of 4 percent from the previous year. Still, there were 4,699 regulations at various stages of implementation, an increase of 3.5 percent. If all are approved, the additional regulatory burden on businesses and the public will total another $15.8 billion.

Invidious invasion

Crews adds that of the 4,699 rules in progress, 1,054 would impact small business. That's an increase of 9 percent from the previous year and 40 percent in the past five years.

His report notes the average two-earner family with after-tax income of $41,846 pays 18 percent or $7,410 annually for regulatory costs imbedded in their other expenditures.

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Commentary: Hidden Costs to Taxpayers of Regulatory Compliance


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