Report: Overregulation strangling Calif. small businesses

Chris Rizo Sep. 25, 2009, 6:15pm

SACRAMENTO, Calif. (Legal Newsline)-State regulations are strangling small businesses in California, a new study indicates.

The report by California State University Sacramento professors shows that state regulation of small businesses in the Golden State is nearly a half trillion dollars annually and costs the state 3.8 million jobs.

The study -- "The Cost of Regulations on California Small Business" -- found that the cost to small businesses in California is more than $492 billion - almost a third of the state's gross product.

The cost of regulation also affects families in the state, to the tune of more than $13,800 per household.

"The ultimate drivers of growth and economic prosperity are innovation, economic risk taking, and investment. The majority of this comes from small business," the report said. "Legislative and regulatory mandates often result in practices and enact policies that raise the costs of operating for small business or provide a deterrent to small business growth and hence provide disincentives for economic risk taking and entrepreneurship."

The leader of the state's taxpayer rights group said the report's findings are appalling.

"The cost of overregulation is absolutely stunning," said Jon Coupal, president of the Howard Jarvis Taxpayers Association. "Just when you think state government has driven the economy off a cliff with massive tax increases, you discover they've driven it off the cliff, down the embankment, and into the pond with these hidden costs."

The study was sponsored by the Small Business Administration. It was written by Sanjay Varshney, professor of finance and the dean of the CSUS College of Business Administration, and by marketing Professor Dennis Tootelian.

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