Somebody hit the panic button too quickly at the Arizona Republic. A couple of weeks ago, its editorial board declared plans for a Regulatory Tax Credit would result in “regulatory Armageddon.”
No doubt the tax credit has the potential to encourage serious regulatory reform. It would allow victims of excessive regulation to bill the government for its regulatory overreach. But, far from Armageddon, the initial impact of the pilot program proposed by the Arizona House Leadership is downright tiny.
Beginning in 2015, the reform would give taxpayers only a modest tax credit -- $1,000 per tax year for individuals and $3,000 per tax year for corporations. The total for all credits would be capped at $800,000 per year—an infinitesimal 0.02% of the $3.4 billion in annual state income tax revenues.
Given the tax credit’s tiny fiscal footprint, the real question is: Why would anyone be against it?
It can’t be the cost of administration. Estimated administrative costs would be roughly $350,000 per year. That’s $50,000 less than what Phoenix recently paid for a single study of excessive government employee compensation.
It can’t be tax evasion. The handful of taxpayers who would claim a regulatory tax credit would paint a target on their backs, risking tax audits if they make frivolous claims.
And it can’t be the definition of “excessive regulation.” To trigger a tax credit, the taxpayer must show that a regulation does not verifiably protect public health and safety or guard against fraud, dangerous occupations or harmful property uses and conditions. This is the very definition of a needless regulation.
Yes, the Regulatory Tax Credit would modestly require the government to foot the bill of excessive regulations for affected taxpayers. Hopefully someday the program will expand. But this would only motivate governments to consider more seriously how and whether to regulate people and businesses. It would not repeal a single regulation government was willing to pay for.
That’s good government – not “regulatory Armageddon.”
Goldwater Institute: The Missing Reform: Regulatory Tax Credits
Arizona Legislature: Nick Dranias Testimony in support of HB2815 (at 3:52)
Arizona Republic: Measure Itself Is Excessive
Arizona Republic: Tax credit could guard against regulatory abuse