RALEIGH – North Carolina businesses are overregulated.
That’s my opinion, yes. But it is an opinion broadly held by owners and executives of North Carolina businesses. In a survey of 300 business leaders the John Locke Foundation conducted earlier this year, the regulatory burden was ranked as the second-most important factor reducing North Carolina’s economic competitiveness. The same survey had about three-quarters of respondents say that the costs of regulations exceeded the value of health, safety, and other benefits they conferred.
Notice that the assumption here is that regulations do confer benefits. Neither the business community of the state nor I would suggest that government has no proper regulatory role. Obviously there are cases in a free society in which the costs that an individual or group imposes on others are not fully reflected in market prices, as with emitting dangerous substances into the air or into common water supplies. For government to act in these situations does not violate our individual rights; indeed, the state is acting to define and enforce our individual rights to, for example, breathable air.
Unfortunately, political leaders have long since expanded governmental rulemaking to include all sorts of activities that have little do with commonly owned assets or externality problems. Often, the purported justification is consumer information. Shouldn’t the government require vendors to disclose information that would help consumers make good decisions? Yes, in principle there may be an appropriate role for government in preventing outright fraud. But policymakers should use the least-restrictive means at their disposal.
For example, all restaurants in North Carolina must be inspected by health departments and post the resulting letter grades and numerical scores. Starting this month, the displays have been redesigned so that restaurant patrons can more clearly see what the grades are. Several restaurants are praising the new approach, saying that they want their customers to be able to see clearly their level of sanitation. They think it will be a selling point. Then what was stopping them from more prominently posting their grades? The previous design? My view is that this function would be better handled by a certification process, letting customers decide how much they value the results of annual inspections, rather than a single state-mandated approach.
Another local practice that has long bothered me is the privilege-license tax. Local governments in North Carolina have long charged businesses an annual tax for the “privilege” of doing business, even though the freedom to conduct business is a right, not a privilege. The proceeds – about $85 million statewide last year – aren’t earmarked for any particular purpose, but a clue as to the intent of privilege-license taxes is found in the case of Currituck County out on the coast. It doesn’t currently levy the tax. Advocates of a variant of the idea, a flat fee, say it would allow officials to “track business activity in Currituck” – with the primary goal apparently being to ensure that businesses comply with zoning rules.
Again, even if you accept the legitimacy of zoning – I think it is grossly misused – surely this isn’t a reasonable means of enforcement. Businesses so marginal as to be unnoticeable without recourse to privilege licenses are probably not causing much of a problem regardless of where they are located.
You can invent a plausible-sounding rationale for many regulations. But as a whole, they are excessive, costly, and counterproductive. Time to separate the truly defensible from the merely plausible.
Hood is president of the John Locke Foundation and publisher of Carolina Journal.