Small businesses fret less about taxes than over-regulation
小本生意担心监管过度问题多过税收
IAN TONER, an architect in Philadelphia, recentlywent to city offices for a permit to build a stoop for a client's home. The city, he learned, hadjust imposed new requirements:he would have to get maps from gas, electric, water and otherutilities to ensure the stoop would not disturb their underground lines and then resubmit hisapplication. A process he thought would take a day took more than two weeks.
That's not all. Other new rules require that he prove that his builder has general liability,workers'compensation and car insurance, and has paid all his taxes. Four times a year he mustset aside a half day to ensure he is paying the state's and city's myriad taxes correctly. MrToner doesn't question the need for rules and taxes; what galls him is the time and hassleinvolved in complying with them. “The information exists all over the place and the burden is onme not just to gather it but interpret it. I'm not going to leave here because of this, butthey're all things that could turn a person off of coming here.”
America's states and cities have traditionally tried to attract businesses by offering them taxbreaks and other cash incentives. Yet there may be a more effective way, and one which putsno strain on stretched budgets: make life simpler.
Thumbtack, a website that matches customers to businesses, and the Kauffman Foundation, athink-tank, asks thousands of small businesses annually about local requirements for hiring,regulations, zoning, licences, health insurance and training. They have enough data to compile(somewhat subjective) “business climate” grades for 38 states and 82 cities.
One surprising finding is how little local tax rates matter. Nearly two-thirds of respondents saythey pay their “fair share” of taxes, which the survey-takers reckon means they don't feelover- or undertaxed. But many complain about the difficulty of complying with complexregulations: this was a strong predictor of how small businesses rank their states.
To be sure, low-tax states such as Texas generally score well, while high-tax states such asCalifornia and Illinois flunk their tests. This may be because the kind of politicians who like hightaxes also like bossing people around. But not always. Minnesota, a high-tax state, earns arespectable “B” for business climate, partly because it is easy to start a business there.Washington and Florida, both low-tax states, earn a “C” and a “C+”. Entrepreneurs faultWashington's harsh zoning laws and gripe that in Florida new firms must jump through hoopslike dolphins at SeaWorld.
The lesson for politicians is: “no matter what else you do, make things easy,” says Jon Lieber ofThumbtack. “This may seem obvious but a lot of governments don't do it right. Don't require aplumber to spend two days at city hall pulling permits when he could be doing jobs.”
Too often, state websites are confusing and bureaucrats unhelpful. Dennis Kessler, anaccountant in New Jersey, says he usually can't get through on the telephone to the relevantdepartment. When he does, the information is often misleading or incomplete. He recentlyspent 30 hours trying to help a client change its corporate status without getting a differentfederal tax-identification number—only to discover that this is impossible.
Licensing rules are a headache. In theory, they protect the public from incompetence, which isuseful if you are hiring a doctor. But increasingly they protect incumbents from competition—the requirement to have a licence raises an occupation's wages by 18%, according to MorrisKleiner and Alan Krueger, two economists. In the 1950s less than 5% of workers required statelicences; now 35% do.
Some make no sense. Celeste Kelly, a horse lover, began offering horse massage, a subject shehad studied privately, in 2006; she charges $55 per session. In 2012 the Arizona StateVeterinary Medical Examining Board ordered her to “cease and desist” or face heavy fines andpossible criminal charges. According to the Institute for Justice (IJ), a libertarian law firmwhich is suing the board on her behalf, Arizona does not require vets to learn massage, and MsKelly may offer it for free; she simply can't charge for it unless she's a vet. “Veterinarians Iknow think it's ridiculous,” she complains. “It's their political arm that has crafted legislationto be self-protective.”
State licensing regimes vary widely. Louisiana requires licences for 70% of low-wageoccupations, according to IJ, including barber, bartender and cosmetologist. In Wyoming, it is amore modest 24%. In Hawaii, licences require an average of 724 days of experience andeducation; in Pennsylvania, 113. Enforcement is uneven, too.
Changes to regulations have little effect on economic growth in the short run—cyclicalinfluences such as the state of the housing market or the fortunes of a particular industry(high-tech in California, oil in Texas) matter more. But in the long run, business-friendlinessmakes a difference: one study found that states that rank better on indices of taxes, costs andregulations enjoy stronger job growth, after filtering out the influence of industry compositionand the weather. Globally, countries that rank higher in the World Bank's surveys of the easeof doing business grow faster.
Lowering barriers to entry for new businesses gives consumers more choice and cheaperprices. A gourmet-food-truck fad began in Los Angeles with $2 Korean tacos in 2008, and hasthrived because the city is flexible about where such trucks can park. By contrast, Chicagoforbids food trucks from operating within 200 feet of a bricks-and-mortar restaurant, andrequires them to have a GPS to ensure compliance, which makes life very hard for them in thedowntown business district.
Businesses lobby for lots of things they should not have: handouts from the taxpayer,handicaps imposed on their rivals. But it is hard to find fault in their plea for simpler rules,swifter bureaucratic decisions, government websites that a normal person can navigate andofficials who actually answer the phone.
Clearing away old rules is hard. Their benefits tend to be concentrated (eg, when they protectincumbents); their costs dispersed (slightly higher prices affect all consumers, but only alittle). States and cities can, however, slow the pace at which new rules proliferate, for exampleby estimating their economic impact before enacting them. Last year Iowa's governor vetoed abill that would have required licences for drug-abuse counsellors, and Arizona made life easierfor firms operating in multiple cities with separate sales taxes by limiting them to one tax formand one audit.
The difficulty is that many rules purport to protect the public: from shoddy services,dangerous products or even death. Even if the cost is high and the risk remote, no politicianwants to be accused of compromising public safety. Last year Mike Pence, Indiana's Republicangovernor, vetoed the licensing of diabetes educators and anaesthesiologist assistants, on thegrounds the new rules would raise barriers to business and require additional bureaucracy.But a year later, he signed into law a modified version of the measure, minus the extrabureaucracy but otherwise much the same.