Regulations aren’t meant to hurt Kansas City small business - but that’s what happens | Opinion
Too often, discussions about regulatory reform are cast as a fight between unscrupulous corporate executives and selfless activists or civil servants risking everything to stop them. That may make for dramatic movie scripts (and there are a lot of them) but it doesn’t reflect reality.
In the real world, the burden of regulations is often borne by the would-be small business owner who faces barriers such as occupational and business licenses, questionable health regulations, building codes, taxes and fees and paperwork that goes with them. And the bad guys aren’t conniving bureaucrats in city hall, but a patchwork of well-intended requirements built up over time, like the sludge in your basement floor drain.
Those small business owners are vital to our economy. According to the U.S. Bureau of Labor Statistics, small businesses with 249 or fewer employees accounted for 55% of total net job creation over the past 10 years. The Small Business Administration reports that small businesses employ 46% percent of private-sector employees and pay 39% of private-sector payroll.
Local governments should help these entrepreneurs, not hinder them.
Talk to anyone in any city who owns a business, from home builders to bar and restaurant owners to barbers — they all have horror stories about trying to comply with the regulations set before them.
In 2022, the 501(c)(3) nonprofit Institute for Justice published a 20-city study called Barriers to Business, which measured the real-world obstacles to starting a business. Researchers examined local codes, looked through city websites and added up the fees and forms required of entrepreneurs — difficult work and not often done. Other studies have examined more easily measured items such as taxes, numbers of startups being created or opinions of entrepreneurs themselves. But few have taken on the task as thoroughly as the Institute for Justice.
Kansas City was not one of the 20 cities studied for the 2022 report, but the findings elsewhere were startling. San Francisco requires 17 different fees totaling more than $22,000 to start a restaurant. Second was Minneapolis, with 14 fees totaling almost $14,000. Newark and Boston each require seven in-person visits to various agencies in order to begin operating a food truck. Phoenix requires 21 different regulatory steps just to open a home-based tutoring business.
Armed with what they learned in 2022 and working with local entrepreneurs, the Institute for Justice’s Cities Work campaign published a detailed policy report for Kansas City, focusing on the significant regulatory barriers faced by local entrepreneurs. The report, based on conversations with local business owners, recommends reducing compliance costs, streamlining permits and licenses, reforming regulations and improving accountability in the inspection process. The Cities Work team committed to supporting Kansas City’s efforts by collecting feedback on the success of reforms and assisting in drafting ordinances to ensure a more business-friendly environment.
The irony of all these barriers? None of them are intentional. Cities are eager to have more and better businesses paying taxes and creating jobs, and leaders often set up whole agencies to give taxpayer money away to large businesses in order to lure them in. Yet the small startups, new ideas and product innovators are not only ignored but are squeezed to offset all those giveaways. They don’t have the lawyers and lobbyists to seek carve-outs and subsidies.
Cities should focus less on wooing the Walmarts out there and more on encouraging the next Sam Waltons among them. The Institute for Justice’s City Works Playbook is a great place to start.
Patrick Tuohey is co-founder of Better Cities Project, a 501(c)(3) nonprofit focused on municipal policy solutions, and a senior fellow at the Show-Me Institute, a 501(c)(3) nonprofit dedicated to Missouri state policy work.