05/19/2017

An Insider's Account Of The War On Work

John Tamny, Foundation for Economic Education

In Pasadena, CA in the 1970s, a married mother of two in my neighborhood began a daycare service out of her house. What was interesting at the time was that not long after starting her business she was visited by local government officials. It seemed she needed a license if she wanted to continue operating.

It didn’t register at the time (I was very young), but looking back, this was very odd. Parents are nothing if not overly careful when it comes to their children. Most would never put their child in the care of someone whom they didn’t trust, who was irresponsible, incompetent, or all three. As such, when it comes to daycare, the very idea of a license requirement reads as superfluous. But what was odd back in the 70s became increasingly common, and is very common today. 

As William “Chip” Mellor and Dick Carpenter, respectively chairman/founding general counsel and director of strategic research at the essential Institute for Justice report in their recently released book Bottleneckers: Gaming the Government for Power and Private Profit, “Some criminals begin at a young age” by virtue of “conducting business without a license.” While in the 1950s roughly 5 percent of U.S. workers needed a “government-issued license to work,” the authors cite estimates that what used to be one in twenty is “almost one in three today.” Odds are if you start a business, you’re breaking some kind of licensure law based on your lack of “a government-issued permission slip” allowing you to work. 

Mellor and Carpenter attach an adjective to those individuals and industry groups who use government to limit the entrance of new competition. They call them “bottleneckers,” and a bottlenecker is “a person who advocates for the creation or perpetuation of government regulation, particularly an occupational license, to restrict entry into his or her occupation, thereby accruing an economic advantage without providing a benefit to consumers.” License requirements are but one way that those with close ties to government secure for themselves a supposed advantage. And they do so in surprising ways.

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Thanks to "bracket creep," the inflation of the 1970s pushed millions of taxpayers into higher tax brackets even though their inflation-adjusted incomes were not rising. To help offset this tax increase and also to improve incentives to work, save, and invest, President Reagan proposed sweeping tax rate reductions during the 1980s. What happened? Total tax revenues climbed by 99.4 percent during the 1980s, and the results are even more impressive when looking at what happened to personal income tax revenues. Once the economy received an unambiguous tax cut in January 1983, income tax revenues climbed dramatically, increasing by more than 54 percent by 1989 (28 percent after adjusting for inflation).

 

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