The IUSB Vision Weblog

The way to crush the middle class is to grind them between the millstones of taxation and inflation. – Vladimir Lenin

Regulation costs California economy $492 Billion – That is $134,122.48 per small business …

Posted by iusbvision on September 28, 2009

Our friend Michael van der Galien at Poligazette posted a link to a study that explains the degree in which bad government can destroy wealth, kill jobs and raise the prices of everything you buy.

Poligazette explains that the total cost of regulation to the State of California is $492.994 billion per year. That is ‘almost five times the State’s general fund budget, and almost a third of the State’s gross product.’ 3.8 million jobs are lost because of overregulation which is a tenth of the State’s population. Furthermore:

Since small business constitute 99.2% of all employer businesses in California, and all of non-employer business, the regulatory cost is borne almost completely by small business. The total cost of regulation was $134,122.48 per small business in California in 2007, labor income not created or lost was $4,359.55 per small business, indirect business taxes not generated or lost were $57,260.15 per small business, and finally roughly one job lost per small business.

Some people feel better “when that rich guy” or “that business owner” gets taxed. Democrats play the class warfare game and tell us how they are going to “make them pay” etc… How does $500 Billion in lost wealth every year make you feel now? How many jobs could that money create? How many movie tickets bought, homes built, computers made, policeman trained, schools improved, cars repaired, and the list goes on?

It is important to keep in mind, every regulation is an arbitrary barrier to creating products, wealth and jobs. Getting rid of regulation does NOT mean getting rid of good policing. While rhetorically there may not be much difference between regulation and policing, in practice the difference is massive. We all want an active but limited government to protect us from fraud, abuse and crooks.  

As I commented on Poligazette:

I hate to throw soot on a gloomy picture, but it is even worse.

Why does California, a state that has more ability to create wealth than most countries, have this level of regulation that is causing the state to fall apart and its population vote with their feet and leave?

For each of these regulations, someone benefits either monetarily or ideologically. Many of these regulations simply serve to pick winners and losers by tilting the scale to help some business while harming their competition; with the winners kicking money back to interest groups and legislators.

The California Legislature is so strapped with the corruption otherwise known as “political market economics” (aka corporatism light) that it is a wonder the state went this long before starting to fall apart economically. But until the people who vote there learn a lesson I do not expect things to change in any meaningful way.

These regulations keep coming and the latest proposals are to have the state ban certain colors from cars, mandate the color of the roof of buildings and even have your home thermostat connected to the internet so the state can control the temperature of your home.

One Response to “Regulation costs California economy $492 Billion – That is $134,122.48 per small business …”

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