Connecticut's Regulatory Climate is Strangling Business
Updated: Oct 29, 2020
Connecticut has an enormous amount of regulation, somewhere in the range of 15,000 pages and growing. This is harmful to our state's economy because it forces businesses and residents out to states with lower barriers to enter their economies. Consequently, we receive less in tax revenue and our infrastructure and social welfare programs cannot be maintained. This is a major problem, and we need to address it immediately.
A survey of small businesses by BlumShapiro from 2016 showed that:
The greatest barriers to growth, in order, are Connecticut’s costly government regulations, taxes, uncertainty surrounding legislative decision-making, and the state’s high cost of living.
More than a third of respondents report that state regulations are hampering their business, and 60% characterize those rules as complex and vague.
The cost associated with complying with state regulations is the number-one challenge for Connecticut businesses this year (79%); taxes are a close second (74%), followed by uncertainty or unpredictability surrounding legislative decision making (71%) and the state’s high cost of living (69%).
There has not been a significant amount of research done on CT's regulatory climate since the 2016-2018 period, but the reality on the ground has not changed very much. We should take seriously what Connecticut small business owners say, because they are responsible for creating and maintaining the vast majority of jobs in our state.
Building an economic environment that alleviates the top four concerns of small business owners would be an enormous boon to our state. It would also lead to more and more people coming to our states, increasing our overall tax base, improving our schools, and creating more skilled applicants for our workforce. With a better workforce and higher paying jobs, we could rebuild our infrastructure and return Connecticut to the position of prosperity it once held.
The Hardest Hit Businesses
Connecticut unnecessarily regulates businesses and drives up prices. We saw this, for instance, when Covid-19 hit and the restrictions around telemedicine were eased. This was a good temporary reform, but it should never have been necessary in the first place.
From The Yankee Institute: "According to Connecticut law, individual and group health insurance policies must pay the same rate for telemedicine visits as in-person visits. This makes no sense and limits one of the largest benefits of telemedicine – providing care at a lower cost. This law should be amended."
To list regulations that need to be rescinded or amended in one place is an impossible task given the sheer magnitude. Only a large, comprehensive effort could get the job done. There are, however, some notorious instances of over regulation.
In a now-famous case that went to the US Supreme Court, Connecticut teeth whitening shops were forced to close because they did not have the credentials of a dentist. Special interests in Hartford ensured that only dentists could whiten teeth, even though the same materials that these shops used are already regulated and available over the counter to consumers. Connecticut made running such a shop punishable by up to five years in prison and drastically increased the costs of teeth whitening by allowing another monopoly in the market.
As the Institute for Justice, who litigated that case, phrases the core issue: "What is the difference between whitening your teeth at home with a product you buy online and whitening your teeth at a shopping mall or salon with an identical product bought there? The person who sold you the product at the mall or salon can be charged with a felony and sentenced to up to five years in prison."
This is emblematic of Connecticut's regulatory environment.
How Much Does it Cost to Work in Connecticut?
Licensing requirements for a variety of workers, like hair stylists and aestheticians, among others, are incredibly expensive. In other cases, licensing fees are unnecessary high and take money from out of the pockets of our workforce for little or no benefit.
A study from the Yankee Institute in 2016 found that "... occupational licensing does affect the wages and/or employment of a number of occupations examined in the present study."
The worst part of our state's regulatory regime is that it hurts low income folks the most. When a hair stylist is unable to work because they cannot afford the costs of getting themselves licensed, and the hourly requirements on top of them, that removes someone from the workforce and may even make them reliant on government programs. That is not good for the individual or for taxpayers.
In the case above, apprenticeships for some jobs would be one solution to the issue, but there is rarely a one-size-fits-all fix. This is not fair, and Connecticut's Democrat supermajority does not seem to care.
It's well past time that we overhaul Connecticut's regulatory scheme and make it easier for people and companies to do business here. I will work to make Connecticut affordable and competitive.