WASHINGTON – Two new studies on the impact of regulation and taxation in the American economy show a climate increasingly hostile to businesses and taxpayers alike.
A new study by W. Mark Crain and Joseph M. Johnson shows that U.S. manufacturers spent $2.2 million per firm, or about $1,700 per employee, to comply with federal workplace regulations in 2000. This figure represents a regulatory cost 75% higher than previous studies, indicating that workplace regulations cost the entire manufacturing sector about $32 billion in 2000. The cost of regulation data comes from 100 U.S. manufacturers that were surveyed between June and August of 2001.
Crain and Johnson\’s survey breaks ground by being the first study to include the costs of all federal regulations imposed on manufacturers and also takes a larger sampling of data including manufacturers of all sizes. The survey also showed that federal regulations are more burdensome to small manufacturers than to larger ones due to economies of scale. It can be found at www.mercatus.net.
A second study released by the Congressional Budget Office (CBO) shows that taxes as a percentage of GDP were at a post WWII high, until cut by President Bush\’s tax relief legislation last year. Taxes in America remain well above the historical average, at almost 2 percentage points of GDP above their long-term average of 8.3 percent. Furthermore, had there been no tax cut last year, income taxes would have remained above 10 percent of GDP indefinitely. Even with the tax cut, income taxes will remain well above 9 percent of GDP for the entire forecast period — considerably higher than their historical average.
Taxpayer advocate Grover Norquist, who heads Americans for Tax Reform (ATR) in Washington, said the study "spoke volumes on the burdensome costs of regulation and taxation in the American economy."
"Crain and Johnson\’s work show what American entrepreneurs have been saying all along: regulations and red tape are a hindrance to productivity, which in the long run will drive business and industry to less-regulated economies," said Norquist. "The best way to stimulate the economy is through tax cuts, and the best unspoken way to stimulate the economy is to cut the red tape regulating business. The studies show that past decade saw a lot of taxation and taxation through regulation, and I hope to see a reversal of this trend as President Bush\’s economic policies take hold."
The survey compliments the findings of the Cost of Government Day study published every year by Americans for Tax Reform (ATR). Last year, Cost of Government Day fell on July 6th, as taxation and regulation by all levels of government cost Americans over half of their productivity.