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Regulatory Reform Is The Jan Brady To Tax Reform's Marcia

By Laura Jones

Published in The Hill December 13, 2017


Washington is focused on The Tax Cuts and Jobs Act while significant regulatory reform proposals, like The Regulatory Accountability Act, languish. Tax and regulation are members of the same policy family — both greatly impact economic dynamism and our lives.

So why do we treat them differently? Like Jan standing next to Marcia on “The Brady Bunch,” regulatory reform often gets overlooked in favor of the more popular tax reform.

Regulatory reform is every bit as worthy of our attention, and maybe more so. It is a tax — albeit a hidden one — and the largely unchecked piling on of more rules is costly and getting costlier.

There are now so many rules in the U.S. Code of Federal Regulation (CFR) that it would take a full-time worker 3 years, 177 days and 10 hours to read them all. In 1970, it would have taken just under a year.

That’s just the tip of a very big iceberg: Lots of federal rules fall outside the CFR and, of course, there are other levels of government with a penchant for rulemaking.

Reducing excessive regulation has real potential to grow the economy, but without tax reform’s danger of increasing deficits. Consider a recent study by the Mercatus Center’s Patrick McLaughlin showing that if federal regulation had been kept at 1980 levels, America’s economy would have been 25-percent larger by 2012. That’s a staggering difference of $4 trillion, or $13,000 per capita.

Does Jan have your attention now?

It’s possible to put the spotlight on both Marcia and Jan at the same time. The Canadian province of British Columbia took this approach in 2001 when its economy was underperforming relative to the rest of the country.

Its government reduced personal income taxes and implemented a groundbreaking new approach to regulatory reform — one that’s reduced the number of provincial rules by an astonishing 47 percent to date.

The economic result of pursuing both reforms at the same time was clear — the province went from zero to hero. One of the worst-performing economies in the country quickly became one of the best. From 1994 to 2001, economic growth in BC was 1.9 percentage points below the Canadian average. From 2002 to 2006, it was 1.1 percentage points above average. BC continues to be an economic leader in Canada today.

It’s hard to imagine tax reform alone achieving this result. Why cut taxes but do nothing about the rules that were creating a billion dollars of unnecessary cost for the forest industry with questionable environmental benefits? Or ridiculous mandates on what size televisions restaurant owners could have in their establishments?

This served as a model for the rest of Canada. Former Prime Minister Stephen Harper made it a federal priority and worried that “red tape is a silent killer of jobs.” Canada became the first country in the world to pass a law requiring that for every new regulation, one equivalent burden must be removed — legislation that was supported unanimously save for one vote in the House of Commons.

President Donald Trump issued a similar executive order earlier this year. But history tells us that without legislative backing, its ultimate impact will be limited. Many other presidents have tried and ultimately failed to rein in the near relentless increase in federal rules. For short periods, the number of rules dropped, only to rise again to new high water marks.

The challenge is large, but so too are the rewards — and not just financial. Less red tape gives people back the most precious of all commodities: time. It provides time to innovate; time to create new business plans; time to serve customers; time to spend with family; time to breathe.

Less red tape does another powerful thing: It helps improve the relationship between government and the citizens it serves.

Congress should attack excessive regulations with the same urgency as it does tax reform if it wants its competitiveness math to add up. In a world where we keep adding more rules, tax reform only gets you so far.

In other words, it can’t always be Marcia, Marcia, Marcia. Jan deserves her time to shine.

Laura Jones is the executive vice president of the Canadian Federation of Independent Business and an affiliated scholar with the Mercatus Center at George Mason University.

This story was originally published in The Hill.



December 13, 2017

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