California regulations cost the state $492.99 billion per year, according to a study released this week by the Governor's Office.
The estimated $492.99 billion includes the total direct, indirect and induced cost of regulations incurred by California. The figure includes the total income that would have been paid to employees had the state utilized a less burdensome regulatory structure, the impact from the total number of jobs lost in California, and the total property, excise, sales and business license taxes and fees that were not generated due to reduced economic activity in California.
The study, produced by two academics from California State University at Sacramento, was the first study of its kind to review the cumulative fiscal impact of California's regulatory structure.
The study's findings showed that the cost of regulation in the state resulted in an employment loss of 3.8 million jobs, and a $210.47 billion loss in wages and benefits paid to Californians. Also, the total cost of regulation was $134,122.48 per small business, and the total tax and fee revenue lost was $57,260 per small business. About one job was lost per small business.
By stifling the economy, the state's regulations are costing the state approximately $16 billion a year in lost tax revenue, the study found.
AB 2330 (Arambula) of 2006 required that a study be completed and reviewed by the Legislature on the cost of state regulations on small business. The study was turned in to the Governor's Office in 2008, and not released until recently.
The study reviewed California's small businesses, which were said to make up more than 90 percent of the state's employers. The study does not include AB 32 of 2006, which includes costly regulations intended to reduce greenhouse gas emissions in this state.
Assemblyman Dan Logue led a press conference in the state Capitol on September 24 to discuss the study and to call for a moratorium on new state regulations until the cost of existing regulations can be studied further. He said the economic impact of proposed regulations should always be considered, especially at a time when the state's unemployment rate is 12.2 percent.
Cal-Tax Director of Communications David Kline, speaking at the press conference, said: "The report shows that regulation in California is rapidly becoming strangulation of the economy. Policy makers need to look for ways to undo the unnecessary regulations while keeping the important ones that protect the public, and really free up the economy to expand and create more jobs. The best source of new revenue for the state is a thriving economy."
Mr. Kline continued: "There is $16 billion in revenue that the state could be collecting if the economy was just allowed to thrive more, without the impact of overregulation. Instead of searching for new ways to tax people, or entirely new taxes on anybody, we would urge policymakers to look for ways to free up the economy and let the job-creators do their thing, and the state will reap the benefits, too."
Representatives of the National Federation of Independent Business, the California Manufacturers and Technology Association, the Hispanic Chamber of Commerce and other groups also participated in the press conference, along with Assemblymen Roger Niello, Bill Berryhill, Tom Berryhill and Ted Gaines.
Mr. Logue said that he intends to pursue regulatory reform on a bipartisan basis, and hopes to work with labor unions that are concerned about the job losses created by state regulations.
Cal-Taxletter, September 25, 2009
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