You're probably aware that Pennsylvania’s tax burden is among the most oppressive in the country. But the tax code is just the tip of the iceberg when it comes to the state’s stifling regulatory policy. Entrepreneurs and innovators are also weighed down by complex regulations and onerous licensure requirements.
According to a recent survey of thousands of firms, Pennsylvania is one of the least friendly states for small business—receiving a "D" grade for its overall business climate, a lower mark than each of its bordering neighbors. Only 5 states scored worse with an "F".
The survey estimates a whopping 43 percent of low-income occupations in Pennsylvania require a state license. Starting a new business in the Commonwealth has never been more challenging.
The hidden cost of regulatory compliance is staggering. Every afternoon spent toiling away with confusing paperwork is an afternoon that could be spent providing goods or services. Every trip to City Hall to renew a permit, every hour wasted on a government phone tree, every day spent waiting for the bureaucratic stamp of approval to arrive in the mailbox—each of these is a lost opportunity for sustainable, long-term economic growth.
And let’s not forget the cynical reason behind many regulations: to protect established firms from facing new competition. The unfortunate victims of these regulations are consumers, who suffer with higher prices and fewer choices.
Making life simpler for families and job creators may sound like a minor reform, but it would go a long way toward improving Pennsylvania’s economic outlook.
What's more dangerous, an incompetent barber or incompetent emergency medical worker? Most people would say and EMT, but a barber has to undergo almost nine times the hours of training as an EMT before they can get a license to practice in Pennsylvania.
The Institute for Justice this week released a new report looking at occupational licensing requirements across the 50 states for mid- and low-income jobs. They discovered dramatic occupational licensing inconsistencies that undermine the public safety argument used by licensing proponents. For instance, only three states license interior designers and only five states license shampooers.
In Pennsylvania, 44 of the 102 occupations surveyed required licenses, including manicurist and upholsterers. Overall, Pennsylvania's occupational licensing burden is lighter than many states—ranking 38th among the states in licensing burden on residents, due to relatively low fees and education requirements.
As we've pointed out before, these regulations are often not about protecting consumers, but preventing competitors to existing businesses. For those truly worried about ugly living rooms from unlicensed interior designers or a bad hairdo from an unlicensed hair braider, there are less costly ways to protect consumers.
A Morning Call article brings to light the anti-entrepreneurship policy of occupational licensing. The article focuses on fines imposed on folks trying, in most cases, to earn a living: "cosmetologists were the most heavily fined professionals, totaling $1.1 million in assessments since 2008."
Yes, the people that paint your nails have to be licensed by the government; so do natural hair braiders. Recently, there was a push to force interior designers to get a license from the state, apparently to protect citizens from ugly living rooms. The state even licenses small shops offering to sell your stuff on eBay, and folks giving rides to the Amish—all in the name of your safety.
Many of the fines were for working (e.g., painting fingernails) without a proper license, or on an expired license. (Curiously, one of the fines not collected was $2,000 for ... murder! Somehow, I think that fine isn't much of a deterrent.) Supposedly, this practice is justified on the grounds that "salons deal with harsh chemicals, and unlicensed operators often lack liability insurance," thus the state needs to protect customers.
Balderdash! Occupational licenses exist primarily to protect existing businesses against potential competitors. They favor big business against emerging entrepreneurs. Those most harmed by occupational licensing are low-income individuals—those who can't afford to spend 300 hours at a licensed cosmetologist school to be approved to braid hair.
What is the result? "... in many cases, these people move on to other states, for example, and can make it hard to collect [fines]." Hmmm...isn't the goal of economic policy to attract business, not drive out entrepreneurs?
Last week, the Daily Caller featured an article from the Institute for Justice (IJ), which revealed that police in Florida are raiding barbershops for drugs without search warrants, and arresting barbers for not having a state issued license.
As IJ points out, the police don't need a search warrant, because barbershops are licensed and regulated through the Florida Department of Business and Processional Regulations, where the need to follow rules supersedes things like civil liberty.
Like Florida, Pennsylvania's Department of State licenses and regulates barbershops. Last month's "Disciplinary Actions" reported that the Department collected $6,900 in fines and shut down eight barbershops in the Commonwealth, mostly for operating without a license. Acquiring a license costs almost $1,000 in fees, 1,250 hours of training, and passage of an entrance exam.
Pennsylvania has 29 professional licensing boards and commissions regulating numerous occupations. Unfortunately, this extensive network of state licensure often exists to protect current businesses from new competitors under the guise of protecting consumers. To get the state's economy back on track, restrictions on many occupations should be removed.
The Institute for Justice (IJ), in its new report, No Brotherly Love for Entrepreneurs, depicts just how bad the small business climate in Philadelphia has become. The city has embraced a bureaucratic culture that has led to the lowest rate of entrepreneurship of any of the 15 largest metropolitan areas in America.
To make sure it's always sunny in Philadelphia for future entrepreneurs, IJ suggests removing these barriers:
Update Zoning Laws: Philly enacted zoning laws 150 years ago and has yet to update these laws. Instead, bureaucrats create certain exemptions, which has resulted in a red-tape disaster for anyone setting up shop in the city. Additional unnecessary restrictions, such as forbidding individuals from operating a business in their home, limits free enterprise.
Reduce Stifling Taxation: Small businesses get hit with a whirlwind of fees that can make starting a new venture difficult. In fact, the law is so stringent that anyone who makes a buck from a lemonade stand or a blog is breaking the law, unless they register with the city and pay the business privilege fee.
Remove Unnecessary Permitting & Licensing: Unnecessary layers of bureaucracy make jobs more difficult to obtain by requiring entrance exams and city certification. A recent example is the 2008 law that made it illegal for a tour guide to work without passing a history exam to obtain a government-issued license.
IJ's report contains many stories showing how Philadelphia's barriers are a detriment to its citizens. The City of Brotherly Love, and Pennsylvania as a whole, should reexamine policies that discourage entrepreneurship.
States are imposing professional licensing in more and more areas of our daily lives; restricting good intentions, individual entrepreneurship, and now threatening an essential part of church functions -- food.
Awaiting vote in the Senate is House Bill 174, legislation to rewrite Pennsylvania's eating and drinking safety code, this bill has huge implications for churches across the state. If passed as written, churches may be obligated to obtain licenses, updated kitchen equipment, meet seating capacity requirements, and pass inspections just to serve food at church events.
Part of the bill's purpose is to provide funding for organic foods, maple products, food employee certification, and farmers' markets, but the ambiguous language of the bill means churches might be faced with fines.
Religious organizations may be exempted from the license, but not the inspections (and fees), if they have a "sales and use tax license or exemption certificate from the Department of Revenue." This legislation is yet another example of an overreaching government. Churches clearly are not retail food establishments and pose no more risk than a family reunion picnic.
After we noted earlier this week Philadelphia's forcing of any blogger with blogging income to pay the city's business privilege license ($50/year or $300 for lifetime), several others have weighed in on the matter.
Reason Foundation notes this as another example of the misuse of occupation licensing:
Business and occupational licensing regulations are just another example of such coercive molestation. If governments truly want to help improve the economy, they can best do it by simply removing these barriers to work and entrepreneurship and allowing greater economic liberty to naturally lead to greater economic prosperity.
Jason Stverak of the Franklin Center posits that this fee may discourage citizen-reporters:
People tend to forget that bloggers are not all teenagers grumbling about their bad dates or conspiracy theorists railing against the government. The blogosphere is no longer just for ranters and ideologues. Increasingly, straight-shooting journalists cut from newsrooms are becoming online citizen journalists or forming non-profit online journalism organizations. These seasoned journalists-turned-bloggers will quit blogging if they are taxed on their meager profits.
Alex Charyna writes that this is just another money-grab from the city:
I think the city has a sound position. It’s not about free speech or liberty or whatever. It’s about money. Some blogs run as a business (very little, but some income), and the city isn’t business friendly. 50 years of a Democrat run city has led them to scrape the bottom of the bottom of the barrel for any possible source of income. That’s the message that needs to sent.
Business people (of all kinds) have no friends in City Hall.
Freedomworks echoes this sentiment, noting the rampant corruption and overspending in the City of Brotherly Love:
Philadelphia faces a budget crisis due to massive overspending by lawmakers on wasteful projects. In order to make up for their $179 million shortfall, Philadelphia’s government has proposed everything from steep soda taxes to property tax increases.
And Paul Jacob fears the business privilege license could indeed be used as a tool against free speech:
Philadelphia’s pursuit of imaginary scofflaws may amount to just an obtuse lunge for hitherto unextracted funds. But the new protocol is also a weapon that could be selectively deployed, now or later, to harass bloggers who publish inconvenient words. Wouldn’t be the first time in our history that the power to tax has been turned to such ends.
In case you missed it, the city of Philadelphia is demanding local bloggers pay a $300 business privilege license, as reported by the Philadelphia City Paper, despite not making much money on the venture. Somehow, we don't think taxing bloggers is going to put much of a dent in Philadelphia's budget deficit.
Other blogs weighing in on the matter include PA Watercooler, GrassrootsPA, Sights on Pennsylvania, Bucks Right, Larson4Liberty, The Point Press, and the Washington Examiner. For some reason, they object to a seeming infringement on free speech, as well as the cost for the privilege of blogging. Of course, they are all tax scofflaws, having avoided a blogging tax themselves, and don't recognize how Philadelphia is protecting us all from an unlicensed blogger writing about organic vegetables.
Luckily, I will never be asked to pay a bloggers' tax, as the city of Harrisburg faces no need for additional revenue...
The Patriot News has a short article about Pennsylvania lawmakers consider legislation to require interior designers to get a license with the state. To get a license, an interior designer would have to have a bachelor's degree, two years of experience, and pass an exam. A quick read of the article summarizes the rent-seeking behind occupational licensing:
Some interior designers said they welcome the state regulations to distinguish themselves from decorators or other designers who have less formal training. ...
Opponents of the idea say the qualifications to become licensed are too stringent and that there has been no public outcry to merit regulating designers. They also said studies done by several other states have not found unregulated interior design to be harmful to public safety or welfare.
That's exactly it, occupation licensing isn't driven by concern for public safety. After all, when was the last time you saw a rally to crack down on unlicensed interior designers, featuring protesters with ugly living rooms?
Rather, occupational licensing is done on the behest of those already in the industry to limit their competition and keep their wages or prices high.
In his blog today, John Micek makes a couple of jokes about "Joe the Plumber" - probably to avoid being called "Rat Rat Rat" by union bosses (who promise not to intimidate workers if card check passes), as Joe the Plumber was, a at rally against card check in Harrisburg.
His jokes only illustrate the myths that union bosses continue to perpetuate:
[Joe the Plumber] who, you'd think, would be a big fan of unions, being a plumber and all.
Why would I think that? Only 30% of pipelayers, plumbers, pipefitters, and steamlayers are union members - more than 2 out of 3 choose not to join or form a union. And opposing card-check has nothing to do with being anti-union, but opposing legislation that would take away workers' rights. In fact 74% of union households oppose card check.
Oh ... wait ... he's not really a plumber.
Micek is fooled into thinking that the definition of a plumber is someone who got a plumber's license from government, rather than noting that occupational licensing in merely another tool unions and special interest groups use to intimidate their competitors.
For instance, as a case in point, does anyone really believe Micek's reporting would improve if he obtained a Reporter's License from the Commonwealth of Pennsylvania? Or better yet, his Blogger's License?
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The Commonwealth Foundation is Pennsylvania's free-market think tank. The Commonwealth Foundation crafts free-market policies, convinces Pennsylvanians of their benefits, and counters attacks on liberty.