ost Americans pay close attention to how much of their money is taken in taxes each year. But there’s another, less obvious way the federal government imposes financial costs on citizens—and according to a new report, it amounts to trillions annually.
The fiscally-conservative Competitive Enterprise Institute (CEI) just released its annual “Ten Thousand Commandments” report, which documents the “size, scope, and cost of federal regulations, and how they affect American consumers, businesses, and the U.S. economy at large.” Report author Clyde Wayne Crews explains how we face a “hidden tax” from the economic burden of our massive regulatory state. After all, tens of thousands of new regulations are imposed every year
The report estimates the economic costs of federal regulation at an astounding $1.9 trillion annually.
To put that abstract sum in context, it’s nearly as much as the federal government collects in income and corporate taxes in a year. And a country that produced $1.9 trillion in output would be the 8th largest economy in the world (excluding the US). $1.9 trillion is more in economic output than Brazil or Italy produce in an entire calendar year.
Much of this $1.9 trillion in “hidden taxes” is ultimately borne by everyday Americans. To understand why, simply remember that regulations increase the costs associated with production. An unnecessary environmental regulation, for example, may force companies to take more cost-intensive steps during the production process. Ultimately, this leads to higher prices at the check-out line.
The CEI report explains that if we assume the costs all ultimately fall on consumers, then it equates to up to $14,368 in annual costs per US household.
This is a huge hit to the wallet. $14,368 in annual regulatory costs amounts to roughly 23 percent of the average household’s spending budget. It’s more than the typical household spends on food, transportation, healthcare, or anything except housing.
Oh, and don’t forget the $88 billion in taxpayer money spent by federal agencies each year just to administer, implement, and police these regulations.
The takeaway here is broader than just the financial impact of federal regulation, as significant as that may be. It’s yet another reminder that, as economist Frédéric Bastiat famously identified, the costs of government go beyond the obvious, what is “seen,” and extend to the “unseen.”
Of course, when it comes to the ever-expanding federal government, the most obvious cost is what the politicians in Washington, DC take from us in taxes every year. But this new report further proves that the unseen, hidden costs of the federal government’s growing involvement in economic life are even more drastic than what comes directly out of our paychecks.