When Illinois Sen. Everett Dirksen remarked a half-century ago, “A billion here, a billion there, pretty soon it adds up to real money,” it was said with a sense of irony. I offer this clarification because a billion dollars no longer has the impact that it once had. Now with a former senator from Illinois occupying the White House, the federal government is throwing trillions of dollars around as if they were nickels.
Still, for the average taxpayer, whether it is a billion dollars or a trillion dollars, it’s a mind-numbing amount. When the California Legislature approved $12.6 billion in new taxes last February, public anger didn’t really start to mount until it became clear that this would cost the average family about $1,100 each year. This anger was expressed clearly when in May, voters rejected by two to one an additional $16 billion in taxes that could have cost families another $1,400 annually.
So when a just-released study, sponsored by the state of California, showed that the cost of state regulations on business was $493 billion, the real impact was brought home when the authors concluded that the annual cost per household was $13,801.
Perhaps even more alarming is that these regulations cost the state 3.8 million jobs. At 12.2 percent unemployment, the highest in almost 70 years, California ranks fourth behind Michigan, Nevada and Rhode Island. Still, the significance of these numbers is best understood by those who have lost a job or who know someone who has, and this includes most Californians. Most of us are in a position to see the tragic consequences for those out of work, so we understand why the unemployment rate is a major component of what Ronald Reagan called the “Misery Index.”
The California report on the impact of regulations was actually completed a year ago, but its release was held up by the governor’s office. A spokesperson said the delay was so the facts could be checked, but capitol observers are asking if it was withheld because it would have been a public relations nightmare for an administration and Legislature that were seeking massive tax increases at that time. After all, the cost of these regulations amount to a hidden tax, the actual impact of which few people were aware.
As bad a picture as the state regulations report paints, it does not include the impact of radical measures, passed after the study was commenced, to impose new restrictions on the use of everything from energy to land, in the name of reducing greenhouse gases.
After reviewing the report, it is easy to understand why analysts, including the Washington DC-based Tax Foundation, rank California 49th out of 50 as a place to do business. Of course, because of their limited capitalization and lack of political clout, hardest hit by the state’s negative regulatory climate are California’s more than 770,000 small business employers. Given that these brave men and women constitute 98 percent of California’s enterprises and provide 52 percent of the jobs, our policy leaders ought to feel a great deal of shame — although we doubt that they do.
With surrounding states that already impose lower taxes offering incentives for California businesses to relocate, we continue to travel down the road of high taxes and massive regulation at our peril.
Now, no one suggests that California businesses operate without regulations. Regulations are like taxes, a necessary evil. But just as high taxes stifle productivity, so too does massive over-regulation that adds significantly to the cost of doing business.
The classic argument for regulation can be made by those who live downstream from a manufacturing plant, who want assurance that toxins are not being dumped into the water supply. But we live in a state where the nannies in the Legislature attempt to control every aspect of our lives; from when children can be spanked, to our diets, to whether or not our pets are to be spayed and neutered, to the material from which our shopping bags are made.
To ask that the Legislature to take a sensible approach to regulation is probably a bridge too far. However, it should be mandatory that every regulation proposed include a cost analysis. Just like the Environmental Impact Report (EIR) we require for any major construction project, we should require another EIR — an Economic Impact Report — for every new regulation.
When the public is made aware of the actual cost to families and the impact on employment of every new proposed regulation, lawmakers may be forced to stop regarding regulation as a frivolous exercise without real-world consequences.
Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.