By John Hood as appearing in the Shelby Star

Pro-growth tax reform has paid big dividends, at both the state and federal levels, but if I had to pick a top priority for economic policymaking in 2025, it would be to go bigger on regulatory reform.

The truth is that taxes and regulations aren’t entirely distinct policy tools. In both cases, governments confiscate resources from private owners. Taxation brings those resources into public coffers, from which they’re withdrawn to pay for public services. Regulation, by contrast, primarily serves to transfer resources from one private party to another — from manufacturers to suppliers of safety equipment, for example, or from consumers paying higher prices to regulated industries.

Civilized societies need both. There really are true public goods that governments should finance. And there are other public goods, such as clean air and water, for which carefully designed regulation is the best answer.

As government expands, however, fiscal and regulatory interventions tend to deliver diminishing returns. Core public services deliver more value to average taxpayers than they lose by paying their taxes. Core regulations are demonstrably cost-beneficial, producing net benefits in public health and safety. Push beyond these parameters, and you reduce the health, safety, and prosperity of your residents, whatever your intentions may be.

At the federal level, what makes regulatory reform a more attractive prospect in 2025 is that Washington must already grapple with gigantic deficits. While there are certainly tax reforms Congress ought to pass or make permanent next year, large-scale tax cuts could widen budget deficits so much that the potential economic gains would not exceed the losses from higher interest rates and, eventually, fiscal collapse.

Slashing the regulatory burden doesn’t reduce the government’s revenue. Indeed, to the extent households and businesses respond by expanding work, savings, and investment, the resulting economic growth will boost that revenue. At the same time, unneeded regulators can be liberated to find more productive uses for their labor, thus reducing government expenditure (wink wink, nudge nudge).

Here in North Carolina, state government isn’t running an operating deficit. Our constitution doesn’t allow it, thank goodness. Still, the General Assembly has already enacted cuts in corporate and personal income taxes that phase in over the next several years. Given the extent of Hurricane Helene damage and other pressing priorities, state lawmakers are unlikely to find a lot of fiscal space to pursue new tax cuts.

Regulatory reform faces no such constraints. Here’s just a partial list of what the North Carolina General Assembly can do in 2025:

• Build on the state’s new “regulatory shot clock” idea to subject more state and local permitting systems to deadlines. If regulators fail to act on properly submitted applications to build, renovate, or expand private facilities, the default should be approval.

• Modify building and housing codes to make it easier to convert garages, outbuildings, and former office spaces into apartments and condominiums.

• Open up North Carolina’s healthcare sector by removing restrictions on hospital competition and giving nurses more freedom to deliver services for which they are already trained and licensed.

• Make it easier for North Carolinians, be they natives or newcomers, to enter new occupations without jumping through costly and time-consuming hoops. If someone is already licensed to deliver a service in another state, make it a snap to move to our state and immediately go to work without going through redundant training or certification.

• Subject every state regulation to review every five years, rather than the current 10-year cycle. If agencies can’t justify the continuation of the rule, or fail to publish a review at all, it automatically goes “poof.”

• Require any proposed regulation with an expected cost of at least $1 million to return to the legislature for an up-or-down vote. Remember that all regulatory power is granted to administrative agencies by the legislative branch, and can be properly withdrawn if abused.

North Carolina has one of the freest economies in North America. But our competitors aren’t standing still. Neither should we. Let’s roll.

The preceding article originally appeared on December 14, 2024 at the Shelby Star’s website and is made available here for educational purposes only. This constitutes a ‘fair use’ of any such copyrighted material as provided for in Title 17 U.S.C. section 106A-117 of the U.S. Copyright Law.