The Insidious Cost Of Regulation

The first thing to realize about regulation is that it is a tax. In simple terms, if the government wants a certain outcome, it can tax you and use the money to try and accomplish that outcome, or it can require that you expend resources to produce the desired outcome.

The second thing to realize is that while you know what you pay in taxes directly (income tax, property tax, etc.), you do not know what you pay in indirect taxes. For example, few small-business owners who offer a delivery service know how much tax is included in the price of a gallon of gas. Few pay attention to the taxes on their phone, utility bills, internet bills and the like. But even more obscure is the cost of complying with regulations that must be passed on in product prices. Higher costs for electricity used to bake pizza due to regulation of electric utilities are passed on to consumers of pizza. These costs are hidden in the prices of goods and services and never disclosed to the final consumer.

Employers don’t pay the minimum wage; customers do in the form of higher prices to cover labor costs. Competition compels employers to find ways to reduce the use of labor as well to keep prices low, so job loss often pays for the cost of regulation. Every dollar a minimum wage worker gets comes out of the pockets of consumers and reduced job opportunities.

Read more of this Forbes op-ed by William Dunkelberg by clicking here.