Report: Regulations to Cost Taxpayers $1.9 Trillion

There's been plenty of talk ahead of next week's State of the Union address about what the President will and won't include in his speech, considered his first real chance to pitch his legislative priorities as a new session of Congress gets underway. Last week President Obama was in Michigan, Arizona and Tennessee to promote a range of proposals including community college funding and mortgage premium relief; this week, he's discussing cybersecurity job training grants in Virginia and greater broadband access in Iowa.

It's generally understood and expected that these measures will require new appropriations or taxes to fund them (even if the White House won't admit as much). But taxpayers should also be concerned with how much the President's & the new Congress' proposals will add to the staggering 175,000 pages of federal regulations already on the books -- which will cost nearly $1.9 trillion to comply with in 2015.

That's how severely Wayne Crews of the Competitive Enterprise Institute (CEI) estimates red tape will impact the American economy this year, as documented in his latest report on the issue, Tip of the Costberg.

The top three most expensive categories of regulations:

  • Those who are familiar with National Taxpayers Union's work on the costs of tax complexity won't be surprised to learn that tax-related regulations make up almost 17 percent of the total, at an estimated $316 billion.
  • Environmental regulations -- like the 645 pages' worth of new requirements for power plants introduced in July of last year -- account for another 20 percent, or $386 billion.
  • With costs of $399 billion in 2015, Crews expects economic regulations to present the largest burden in the next year, at over 21 percent of the total.

Of course, it can be maddeningly difficult to calculate the true cost of regulations on the economy. Beyond the more easily-quantified administrative costs (such as hiring more regulators to enforce the rules, monitoring implementation, and reporting on their effectiveness), economists need to account for the time spent complying with them at all stages of economic activity and the impact that has on the wider economy. However, the difficulty of doing so is exactly why it's worth trying. In CEI's words:

The third way the government can accomplish its goals is to regulate. That is, rather than pay directly and book the expense of a new initiative, it can require that the private sector and lower-level governments pay. By regulating, the government can carry out desired programs but avoid using tax dollars to fund them. This process sometimes allows Congress to escape accountability and to blame agencies for costs. Since disclosure and accountability for regulation are limited, policymakers have little incentive to care about the extent of regulatory costs or where those costs stand in relation to ordinary government spending.

It's easy to dismiss the cost of regulations when it can be hard to pin them down precisely -- but it's an integral part of evaluating the total economic impact of any given policy, which taxpayers will ultimately be required to pay. So while legislators in Washington will be debating the bottom-line budgetary impact of the legislation they propose in the coming days and weeks, taxpayers should also pay attention to the enforcement mechanisms they suggest, which carry their own costs and are subject to far less scrutiny.