This is a special guest post by Tony West, who is the Deputy State Director for Americans for Prosperity Georgia
Earlier this week, Secretary of State Brad Raffensperger convened the GA WORKS Licensing
Commission with the aim of “reducing barriers to employment while emphasizing consumer
protection for the citizens which utilize their services.” During the meeting, the Secretary of
State’s Chief Operating Officer, Gabriel Sterling, mentioned in regards to reforming
occupational licensure that, and I paraphrase: “we have to be aware that a part of the dynamic within occupational licensure is the idea of concentrated benefits and diffused costs.”
Economist Mancur Olson is credited with coining this language in his seminal work The Logic of Collective Action: Public Goods and the Theory of Groups. In plain English, Olson argued that much of public policy boils down to niche interests lobbying for preferred government treatment at the expense of the common good, whether that’s via cold hard cash or regulatory preference. Terms such as cronyism and rent-seeking are also thrown around to describe this phenomenon. And Sterling is correct, this is certainly present within occupational licensure policy.
Overburdensome licensing leads to consumers paying more, reduced upward mobility for
unlicensed workers, and with little or no impact on quality of services. Those diffused costs are documented by various sources over years of research. So what gives? Where is the concentrated benefit? I’m glad you asked. Current license holders have a direct incentive to play gatekeeper, and limit new entrants into the field, keeping the supply of services lower than they otherwise would be, and prices for consumers higher as well. Georgia is no different than any other state in this regard, but we can certainly do better. Between the aforementioned GA Works Commission and the nascent Senate Study Committee, hopefully Georgia can make strides to improve the climate for people trying to get to work in fields that require an occupational license, and resist the urge to kowtow to those who would pull the ladder up behind them. The passage of HB 155 is an encouraging move that is hopefully a sign of things to come.
Astute observers may note that this benefits/costs phenomenon isn’t limited to licensing, and Mancur Olson argued that it is an inherent feature of our political system. In fact, two other study committees are looking at issues where this dynamic is front and center: The Senate Study Committee on Certificate of Need Reform and the Joint Tax Credit Review Committee.
Certificate of Need (CON) is a perennial topic rife with animosity due to the state’s continued involvement in the freedom of individuals and businesses to open and expand health care services and facilities. Those receiving the concentrated benefits from the regulations within Certificate of Need certainly speak with a loud and unified voice—as Olson predicted. But hopefully, this study committee will raise awareness of the diffused costs caused by the CON.
Recent scholarship conducted by the Mercatus Center shows states with CON laws are associated with higher health care costs, lower quality care, and less access to health care. An analysis by my employer, Americans for Prosperity, noted that over $1 billion worth of health care projects were denied or delayed in Georgia since 2010. These are projects that were geographically and medically diverse, including but not limited to, new hospitals, ambulatory surgery centers, birthing centers, and emergency rooms. These numbers of course don’t include those dissuaded from ever filing a CON application, and are thus invisible to many. A recent report from the Georgia Public Policy Foundation also highlighted the pitfalls and harm done to our state by Certificate of Need.
On the tax credit front, lawmakers are right to review the efficacy of all special-interest tax breaks. There are dozens, if not hundreds, of credits and exemptions within the personal, sales, and corporate tax code, totaling in the billions of dollars. While the concentrated benefits are indeed appreciated by the select few, the diffused costs for Georgia taxpayers add up quickly.
The billion dollar film tax credit is estimated to cost each Georgia household hundreds of dollars annually, according to economist J.C. Bradbury. Lawmakers have a real opportunity to clean up our tax code and use the savings to lower tax rates on all Georgians equally. To our past and present elected leaders’ credit, Georgia responsibly controls its spending. According to the Tax Policy Center, Georgia spends less per capita at the state and local level than any other state. Our middling personal and corporate income rates aren’t due to overspending in the traditional sense, but runaway special-interest tax breaks make it difficult to continue lowering rates to relieve the burden on taxpayers, and keep up with low-tax neighbors like North Carolina.
Unfortunately, Olson doesn’t offer a definitive solution to the problem of concentrated benefits and diffused costs. Bureaucratic inertia certainly isn’t the answer. A straightforward solution is for state leaders to actively address these problems head on, taking the bull by the horns, and prepare to take the slings and arrows from the guilds that benefit from the status quo. A cynic might say that’s wishful thinking, but it’s more common than you’d think. Study Committees are a good initial step in the right direction, and as the cliché goes, the first step to solving any problem is recognizing there is one.