Monday, October 05, 2015

Reforming Maryland Business Licensing Regime

Since taking office, Maryland Governor Larry Hogan has taken some important steps to make good on his pledge to promote Maryland’s economic growth. These steps include restraining government spending through a proposed 2% cut in the state’s budget, reducing fees paid by Maryland’s citizens to state agencies for various services by $10 million a year, and focusing attention on regulatory reform. 
These are commendable steps in the right direction.

But I don’t doubt that Governor Hogan knows there is more that can be done in each of these areas.

For example, in a blog published in August, Maryland Needs to Improve Its Regulatory Climate – Part II, I offered some specific suggestions for improving the state’s regulatory review process that would provide a more rigorous analysis of the costs and benefits of regulations and assessment of their ongoing effectiveness.

In a July piece, Maryland’s Occupational Licensing Regime Hurts the Poor, my colleague, Free State Foundation Research Associate Michael Horney, explained how overly broad occupational licensing requirements limit economic opportunities for Maryland citizens. As he pointed out, “because consumers ultimately pay higher prices as a result of the restricted competition, the increase in prices is disproportionately harmful to the poorest consumers.”

Another area deserving attention for potential reform relates to business licensing, a close cousin to occupational licensing, but nevertheless distinct. There are literally more than 1000 state licenses that must be obtained in order to start various types of businesses in Maryland. Of course, local governments have their own licensing requirements that apply on top of the state requirements.

The statewide business licenses requirements, administered by the newly named Department of Commerce, are arrayed in 19 different categories, ranging from “Accommodation and Food Services” to “Waste Management and Remediation Services.” I invite you to click on any one of the 19 categories and see how many different licenses are required for various subcategories and sub-subcategories. You will see why the overall number of licenses associated with various businesses exceeds 1000.

Just by way of example, in order to start and operate a race track in Maryland, there are 18 different required licenses. For a restaurant, the number is up to 9; for a landscaping business up to 13; and for a lemonade and baked goods stand up to 3.

I am not suggesting that many of the licenses required are not warranted in order to protect consumers and workers from potential health and safety hazards. But I do suggest that a serious review of the licensing requirements would reveal that it is overbroad and that many of the current license requirements could be eliminated or consolidated.

Simplification and rationalization of the licensing regime will make it easier – and less costly – to start and operate a business in Maryland. In line with other of Governor Hogan's initiatives, this would be another important pro-growth measure that would benefit Maryland’s economy and improve its business climate.

Now that the Department of Commerce has changed its name, perhaps, with assistance from the Maryland Economic Development and Business Climate Commission, it can undertake the important work of reforming the state’s business licensing regime.