People may not think of federal government regulations as hidden taxes, but their total cost drains nearly $15,000 a year from the budget of every American family.
"Federal environmental, safety and health, and economic regulations cost hundreds of billions, perhaps trillions, of dollars annually over and above the official federal outlays that dominate policy debate," said Clyde Wayne Crews, vice president for policy and director of technology studies at the Competitive Enterprise Institute.
For 20 years, Crews has produced a report on the growing size and cost of government regulation called "Ten Thousand Commandments."
As of 2012, Crews estimated that the cost of all federal regulations exceeded $1.8 trillion, which breaks down to a stunning $14,768 for each U.S. household.
To put that in perspective, consider that most American families pay about half that in federal income tax.
Government regulations constitute hidden taxes built in to the cost of virtually everything you buy, from healthcare and groceries to housing and transportation.
For example, the Heritage Foundation recently estimated that new fuel economy standards by the Environmental Protection Agency (EPA) will add as much as $1,800 to the price of a new car.
And research firm NDP Consulting said in a study last year that EPA rules governing power generation will increase utility bills for American families by an average of 6.6% annually.
The Hidden Tax Monster Keeps Growing
In a Gallup poll taken last fall, 47% of Americans said there is too much regulation, with the rest split between "just right" and "too little."
But if Americans knew how much government regulation actually cost them, the number saying there's too much regulation no doubt would climb much higher.
So why don't people know about these hidden taxes?
For one thing, government regulations get little media attention. But it's not an easy subject to talk about because the government does such a poor job of tracking how much they cost.
"Unlike federal taxation and spending, there is no official accounting of total regulatory costs," the Heritage Foundation said in a report on government rules it released this month.
That's exactly why Crews started to compile his annual "Ten Thousand Commandments."
The reports have chronicled the relentless expansion of government bureaucracy at the root of the rise in the hidden taxes resulting from the bloat of government regulations.
To see just how bad this problem has become, take a look at these stats from this year's edition of Crews' "Ten Thousand Commandments" report:
- In 1995, the hidden taxes of government regulation cost each U.S. household just $6,457, less than half what they do now.
- If the $14,768 is broken out as a separate expense for a U.S. household with an average income of $63,685 (using 2011 Bureau of Labor Statistics data), it would eat up 23% of the family budget and trail only housing at $16,803.
- More regulation is coming. This year's 2,517 proposed rules are the most since 2003, and 2011's count of 2,898 were the highest of the decade.
- The number of "economically significant" rules - the ones that cost the most, defined as $100 million and up - have been increasing at a more rapid pace in recent years. President George W. Bush's two administrations averaged about 145 economically significant rules a year, an average that has spiked to 211 under President Barack Obama. Last year there were 224 such rules.
- The government issues about 3,500 final rules every year, which means it has produced a cumulative total of 81,883 rules since 1993.
- The page count for final and general rules in the government's "Code of Federal Regulations" was just 22,877 in 1960. By 1975, the CFR had ballooned to 71,224 pages. As of 2012, the CFR stood at a goat-choking 174,545 pages.
Regulations Not Just About Hidden Taxes
Of course, the government begs to differ as to whether regulations constitute hidden taxes on the American people.
In fact, when the government does bother to do a cost-benefit analysis, it almost always estimates that regulations actually save billions of dollars.
For example, the EPA estimated its new emission standard rules would cost $10.8 billion but deliver benefits of $33 billion to $90 billion.
It sounds like they're way ahead until you realize that 99.993% of those "benefits" derive from reductions in airborne "particulate matter" - something the EPA has regulated for years and which supposedly is already at a safe level.
What's more, any benefits from reducing particulate matter are very hard to quantify, so the huge savings the EPA put in its estimates are based on generous assumptions at best.
Finally, there are costs to government rules run amok over and beyond any hidden taxes. More regulation gives more power to unelected bureaucrats and further increases people's reliance on government.
"The ... problem is the trust that people blindly put in regulations and the moral hazard this creates," retired Rep. Ron Paul, R-TX, wrote in a column. "Too many people trust government regulators so completely that they abdicate their own common sense to these government bureaucrats.... With central planning, everything shifts from one's own judgment about safety, wisdom and relative benefits of a behavior, to the discretion of government bureaucrats."
Related Articles:
- Money Morning:
The New Obama Regulations Headed for U.S. Business in 2013 - Money Morning:
Warning: Hidden Obamacare Taxes Will Cost You More Than You Think - Lewrockwell.com:
The Moral Hazard of Regulation - CEI:
Ten Thousand Commandments 2013 - Heritage Foundation:
Red Tape Rising: Regulation in Obama's First Term
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About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.