tax law

CEI Podcast – November 11, 2010: Taxing New IRS Regulations

by Ryan Young on November 11, 2010

in CEI Projects, Deregulate to Stimulate, Economy, Podcast, Regulation

Have a listen here.

Fellow in Regulatory Studies Ryan Young explains how an IRS proposal for mandatory certification of tax preparers would hurt consumers and taxpayers. It is one more example of how regulation can hurt competition. Large tax preparation firms would benefit at the expense of individuals and smaller firms who can’t afford the added regulatory burden.

The “Small Business” Exemption Distortion

by Fred Smith on April 21, 2009

in Deregulate to Stimulate, Economy, Odds & Ends

Many of the federal regulatory and tax laws include a “small business exemption” – politicians displaying an aversion to crippling a politically powerful constituency.  Often this is done by a cap – “This law will not apply to businesses having net annual sales less than some amount.”  Years ago, I saw one consequence of this law in the organization of the US scrap industry.  A prospering scrap firm would approach the cap ceiling and re-organize into two smaller businesses — sometimes one brother would head one firm, another the other.  Nothing wrong with this, save the transaction costs of creating two organizations rather than one.  But these costs may indeed be large – duplicate job slots in the firms, separate marketing and production departments and so forth.

The value of small businesses is that some do not stay small.  Those that grow – for example, the Microsofts of tomorrow – are not benefited by laws that artificially penalize growth.  Like caps on welfare and other redistribution programs, they can encourage firms to avoid the risks — and the benefits — of growth.