For the first time since 1986, Congress is hard at work on significant tax reform legislation. In addition to the chance to make constructive and necessary reforms to the tax code, this effort presents Congress with an opportunity to bring transparency to the hidden costs of federal regulation.

According to data recently released by the Bureau of Labor Statistics, American households on average spent more last year on federal, state and local taxes ($10,489) than they did on food and clothing combined ($9,006). Think about that. These official figures confirm what Americans have known generally for a long time – taxes impose a significant economic burden.

While the costs associated with federal taxes are high, at least their cost has been accurately quantified. The official figures are known and publicly available to support an informed debate about the cost of taxes and the benefits that may result from public spending. But not all the costs of government are so transparent.

In addition to taxes, the government imposes an enormous additional economic burden on American businesses and households through massive and complex regulations that direct and restrict virtually every aspect of our daily existence. Unlike taxes, the costs of these regulations are largely hidden. There is no mechanism, no agreed upon method or procedure to capture and make public all the costs that businesses and households must bear as a result of government regulations.

Some analysts estimate that the total cost to comply with federal regulations now approaches $2 trillion per year. To cover their compliance costs, American businesses are forced to raise the prices they charge for the goods and services they sell. Businesses are also forced to cut other costs, reducing what they can spend on wages, employee benefits, research and development, and production facility upgrades.

In this way, regulatory compliance costs impose an enormous burden on the American economy, a hidden tax that we all must pay in higher prices and smaller paychecks. If this hidden tax were spread evenly to all American households using the $2 trillion cost estimate, the share for each household would amount to approximately $15,000 – fifty percent higher again than all the other taxes the household must pay!

The $2 trillion figure is a staggering cost to our country, but other estimates find the costs associated with regulation are much smaller. In the absence of any agreed upon procedure to calculate regulatory compliance costs, there is no way to reconcile such differences. There is no way to collect and disseminate a single set of data that could support an informed debate about the cost of regulations compared to the benefits that may result from their implementation.

One way that Congress could enhance regulatory transparency is to amend the tax code to include a fully refundable and transferable tax credit for one hundred percent of the actual regulatory compliance costs incurred by a business. There are many strong points in favor of such a tax credit.

First and foremost, the tax credits claimed would leave behind a clear record of total compliance costs on the financial accounts of the federal government. By bringing the currently hidden cost of regulation out into the open for all to see, the tax credit would make a tremendous contribution to transparency and could spark a truly meaningful national discussion about the costs and benefits of regulation.

A refundable, transferable tax credit would fully and consistently reimburse a business for compliance costs. Unlike the tax deduction against income currently available for compliance costs, reimbursement would not be contingent upon the business having taxable income.

By eliminating the need for a business to absorb and/or pass through its compliance costs, such a tax credit would eliminate the economic distortions that currently result from the imposition of regulatory burdens, including lower wages, higher prices and other costs.

This newly created tax credit would be fully self-funding because compliance costs will be incurred and credits claimed only when an agency determines that the societal benefits of a regulation justify the associated compliance costs.

The many benefits that would result from the enactment of the proposed tax credit make a strong case that Congress should give serious consideration to the proposal. Let the debate begin!

J. Kennerly Davis served as Deputy Attorney General for Virginia from 2013-2014. He is an expert contributing to the Federalist Society's Regulatory Transparency Project.

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