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Who knew? Maryland has less red tape than its neighbors

Maryland has a reputation for high taxes and regulation. But while Virginians may joke that the state should be called the “People’s Republic of Maryland,” this reputation is not entirely deserved. Every state has certain regulations that weigh down its economy, and it turns out that Maryland has considerably less red tape than its neighbors.

According to a new analysis by the Mercatus Center at George Mason University, the Code of Maryland Regulations contains 9.7 million words. Of these, 121,741 are restrictive words like “shall,” “must,” and “required.” This count is a good way to estimate how many overall requirements are on the state’s books because even some legislators have no idea.

That may sound like a lot of regulation — and it is — but many other states have even more complicated and convoluted regulatory environments. The Virginia regulatory code, for example, has 133,000 restrictions. West Virginia has almost 126,000, and Pennsylvania has a whopping 153,000.

It’s important to differentiate between justified regulations that truly protect people — these can increase our economic prosperity — and patchworks of outdated or contradictory restrictions that pile up over time.

The latter is a major burden for businesses through paperwork, legal fees and compliance costs. And in Maryland, where you are rarely more than an hour from a border, a few extra rules can mean the difference between jobs created in Baltimore or Frederick versus in York, Philadelphia or Northern Virginia.

One reason for Maryland’s competitive footing with its neighbors may be Gov. Larry Hogan and Lt. Gov. Boyd Rutherford’s prioritization of regulatory reform. Mr. Hogan convened a regulatory reform commission soon after taking office, which Mr. Rutherford helps lead.

The commission has documented dozens of problematic regulations that the governor’s administration has modified or repealed. These include rollbacks of certain rules from the Department of Labor, Licensing and Regulation — the state’s third biggest regulator, based on restriction count.

Occupational licensing regulations, which require people in certain professions like cosmetology and landscaping to get state approval before they can work, are often crafted with the best of intentions. But they also limit upward mobility by creating barriers for people looking to find well-paying jobs or start small businesses to support their families.

These harmful effects tend to fall disproportionately on people with low incomes, as well as other sensitive populations like immigrants and military spouses. The problems with occupational licensing highlight how the effects of regulation in general often hit the poor and vulnerable the hardest.

Maintaining Maryland’s competitive regulatory environment will be one of the main challenges Annapolis lawmakers face in coming years. Labor rules could benefit from an independent panel to reassess which occupational boards make sense, and which are just raising prices for services like haircuts and home renovations without any real health or safety benefits.

More broadly, the state might also want to consider whether a cap on the overall level of regulation is a good idea. This is the approach that the national government in Canada has implemented. There, each new regulation must be offset by eliminating burdens from old rules.

That 2015 law passed the Canadian parliament almost unanimously, likely because it was similar to an effort that began in the province of British Columbia in 2001, which was widely viewed as a success. More recently, Texas passed a similar law earlier this year.

A cap could help to lock in Maryland’s competitive edge. This advantage over other nearby states could easily erode over time because regulation tends to grow, a phenomenon known as regulatory accumulation. This occurs naturally in years when more rules are added to the books than are taken away, as is typically the case. All these rules can mean the difference between a business expanding in Maryland or going elsewhere instead.

Maryland should look to build on its favorable business climate and become an even more attractive place to invest and create jobs. Repealing burdensome licensing regulations and putting a cap on the overall level of regulations are sensible steps toward maintaining the state’s economic competitiveness for years to come.

James Broughel (Twitter: @JamesBroughel) is a research fellow with the Mercatus Center at George Mason University and coauthor of the new study “A Snapshot of Maryland Regulation in 2017.” Nick Zaiac is a Mercatus MA fellow.

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