Could Be Worse: Study Finds Michigan’s Regulatory Burden On Business Less Than Nearby States

A new report from a Virginia-based research organization finds that Michigan imposes less bureaucratic red tape on business than other Great Lakes states. Published by the Mercatus Center, the report finds Michigan superior to Illinois, Indiana, Ohio and Wisconsin in almost every regulatory category it considered.

Researchers estimated the burden of state regulations by using several metrics: the word count of regulations, their complexity, and the number of restrictions and mandates. Tools included counting how frequently the following words appear in each state’s administrative codes: shall, must, prohibited and may not.

The report also looked at the extent to which industries are affected by the combination of state and federal regulations, and the relationship between population size and number of restrictions. Michigan emerged as the least-restrictive state in every category except for regulatory complexity, where it came in second to last.

According to James Broughel, senior research fellow at Mercatus and co-author of the report, excessive regulation is a drag on economic growth, which eventually generates a decline in living standards. In practical terms, this means lower incomes for residents, smaller profits for businesses, and less revenue for government. These developments hurt lower-income people the most, Broughel said.

“Those who mainly benefit from having lots and lots of regulations are higher-income people, who like having the poor to help pay for risks they want to see reduced, and incumbent businesses who benefit from a complicated regulatory code that keeps competitors out and allows them to keep the price of their product high,” he told Michigan Capitol Confidential.

Fewer regulations, on the other hand, create an environment conducive to business and innovation.

“Since Michigan has a lighter regulatory load than some states, it is conceivable that it suffers from some of these problems less, making life more affordable for state residents and the business environment more open for entrepreneurs,” Broughel said.

Jarrett Skorup of the Mackinac Center for Public Policy says the report’s findings reflect well on Michigan, but he also emphasize the need to hold the line on regulatory expansions.

“Most people agree that we should have regulations in place that directly protect the public,” he said. “Unfortunately, regulatory agencies — the state health, licensing, agriculture, economic development and other departments — have lots of incentive to add new rules and little incentive to get rid of them. Michigan lawmakers should require regulations be regularly reviewed and eliminated if they don’t pass a cost-benefit analysis.”