Occupational Licensing

Licensing Requirements: The Level Grinding of the Small Business World


David Henderson points out an interesting finding from a new Kauffman Foundation survey of 6,000 small businesses nationwide:

Small businesses said licensing requirements were nearly twice as important as tax rates in determining their state or city government's overall business-friendliness.

If you've ever played a role-playing game like Everquest, you know that the games frequently require players to pursue a whole bunch of meaningless fetching of powerless tokens and killing of minor enemies before gaining enough power and in-game credentials to participate in the really interesting parts of the game. RPG players have a term for this: level-grinding. Players obviously have to put up with these requirements because that's how the games are structured, but it really amounts to a lot of forced time-wasting before you get to the good parts. There's a narrow segment of the gaming world that enjoys grinding, but mostly players endure it with a lot of eye-rolling. More and more, game developers have looked for ways to minimize the worst and most obvious grinding requirements because they've come to understand that it annoys most players. 

Small business licensing requirements are sort of like level-grinding in role playing games: They force entrepreneurs to do a bunch of meaningless stuff before they can be productive. But it turns out what small business owners really want is to work.

Plenty more from Reason on licensing requirements here


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  1. Corporate business taxes are usually on the net profit of a small company. So an entrepreneur has to actually make a profit before worrying about them.

    The states that tax inventory give a harder kick to the balls because it is usually a pre-tax expense.

    All the regulatory BS is the worst because to sucks time and money without adding any value to the business. It often requires the expense of lawyers, inspectors, etc… that are direct expenses.

    1. It often requires the expense of lawyers, inspectors, etc…

      They don’t have a problem with that.

    2. You can’t run a business without a competent attorney and accountant.

    3. wait, some states tax inventory? How in the crap does that work?

      1. It doesn’t.

      2. Personal property tax. You have to take inventory at the end of the tax year.

        1. Right, which smart businesses just declare none.

          1. Unless they need the inventory on the balance sheet to qualify for a line of credit or loan for tenant improvements.

  2. But they protect us from the bad things! Everyone knows that a properly-licensed bidness never makes mistakes or commits malpractice!

    1. All part of the *magic* that is government! their invisible unicorns follow around everyone with a business license ensuring compliance with every regulation!

      1. Those aren’t unicorns, those are drones.

      2. And the unicorns also enforce all the laws that haven’t been passed yet.*

        /*top hat tip to the late Frank Zappa character “The Central Scrutinizer”

    2. And of course, the government is the only institution that can properly license businesses. Not like the insurance companies or private agencies could possibly do a better job. You know, like institutions that actually have a vested interest.

      There are three potential problems whenever the government gets involved in anything: incentives, competence, and accountability.

      1. “How do you write women the government so well?”

        “I think of a man private enterprise, and then I take away reason and accountability.”

        1. Either that went right over my head, or it is nonsensical.

          1. Jack Nicholson in “As Good As It Gets.”

            1. Also, best Joker ever.

    3. I’m not sure I want to live in a world that would allow people to be subjected to the whims of unlicensed, fly-by-night florists or funeral directors.

      1. And gypsy dog groomers, Sal.

      2. That’s not the argument that gets most people though. It’s doctors.

        Most people just can’t wrap their mind around a world where you might have to research your doctor to make sure he’s a good one; instead, they’d rather trust the state to license doctors so they are assured the lowest common denominator when they pick a doctor at random.

        1. Can we add “DOCTORZ!” to the “ROADZ!” and “SOMALIA!” memes?

          1. I thought it was already one of the staple memes.

        2. Which is especially retarded because everyone looks to referrals when changing doctors anyway.

      3. Don’t forget rouge interior decorators. PLAID – Oh, the humanity!!!

        1. The chartreuse decorators are even worse than the rouge ones.

          1. Mmmm… Chartreuse; the only color named after a liquor. A delicious, throat searing liquor.

          2. “rogue interior decorators” – well I’m better with numbers anyway.

  3. This just came out from the Institute of Justice:


    1. *for

  4. There’s a bit of the “boiling the frog” effect at work. All these regulations aren’t imposed at once, but slowly over years and decades, so their cumulative effect is more difficult to gauge. You have to go back decades to compare what a comparatively unrestrained American business climate looked like.

    Forget the Gilded Age. The creep of government into every aspect of life is amazing when you compare it just to 1970 or 1980.

    1. So true.

  5. In West Virginia they have a B and o tax.It’s baseed on you gross,not profit.Also a private property tax.You can lose money and still ahve a large tax bill

    1. That sucks. Hows is the B and O tax not a sales tax?

    2. So don’t even bother trying to open a low-margin / high-volume business.

    3. B and O tax

      It stinks!
      It stinks!
      It stinks!

  6. Damn Emp keys

  7. Something you might find very interesting Mr. Suderman.


  8. So our future Central American libertopia is, what, the Guild Wars 2 of countries?

  9. Am I the only one who found ME3 to be a little disappointing?

    Sure, it was fun to catch up with all (and I mean all) the characters from the first two, but, I dunno, it just seems a little . . . thin. I haven’t quite finished yet, but I don’t see myself replaying, which I generally do with games I like.

    I’m thinking Witcher 2 is next up for me. I’ve heard the gameplay is really, really hard, though. Thoughts?

    1. Haven’t played it with the latest improvements for the console port, but it was more that it started really hard and got easier, which is opposite the normal progression of things.

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