Pioneer Institute Report: How Occupational License Laws Reduce State and Local Tax Revenues: The Public Finance Case for Occupational License Reform
Overly burdensome occupational licensing requirements not only slow down the Massachusetts economy and cost the state tens of thousands of jobs, but also reduce state and local tax revenue.
State governments are often unwilling to give up the revenue stream generated from fees for occupational licenses. However, licensing laws actually reduce state and local tax revenue by preventing more people from working. Slower economic growth means lower income and sales tax revenue.
The report found that in 29 of 36 states studied, state and local governments lose more tax revenue from reduced growth than they gain from occupational licensing fees.
There are several policies Massachusetts and other states can implement to reduce licensing burdens. Repealing licensing laws that most other states don’t have, requiring that any new licensing law address a specific public health concern, automatically recognizing all licenses earned in other states, and replacing licenses with voluntary certification programs are all effective approaches the Bay State legislature could consider to reduce the state’s licensing burden.