A new threat to the nascent jobs of the future has emerged: the IRS. The IRS recently announced that it will be rolling out new fees and regulations for individual tax preparers, which are expected to dramatically increase costs for the entire industry. The Washington Post reports:
Some fear the IRS campaign against tax fraud could squeeze out small, independent businesses and allow large competitors such as H&R Block and Jackson Hewitt Tax Service to capture market share. […]To get certified, preparers will need to register and pass a competency test. Some will need to be fingerprinted, pass a background check with the FBI and take continuing education classes.The IRS estimates the licensing fee for each tax preparer at between $250 and $275, but H&R Block expects the cost will be more than $400, including state fees and its own background-check expenses. […]“The fees definitely do pose a barrier to entry,” said McCabe, who noted that tax preparation has been a valuable job opportunity for many older people and women with young children looking for part-time work.
This is exactly the opposite of the course we should be taking now. Politicians on both sides of the aisle talk endlessly about their love of small business, and yet regulations such as these will make it much more difficult for small businesses to emerge. By requiring new licensing programs and charging fees for registration, the IRS is raising the barriers for entry into an industry which has long provided work for individuals running small operations. Large corporations have the capital and the resources to weather these changes without much trouble, but for a mother working as a tax-collector on the side, time and monetary constraints may force them out of their business. Rather than encouraging the development of the jobs of the future, these regulations will discourage would-be entrepreneurs from entering the marketplace.That’s not the only thing wrong with this ham-handed approach. Tax preparation is a significant expense for small businesses: IRS record keeping requirements are complicated and time consuming, and the tax code is so baffling that few small entrepreneurs have the skill or the time to do their taxes on their own. Raising costs for tax preparers and reducing the number of competitors in the business inevitably will raise costs for small business.We need to simplify tax compliance for small business and reduce the costs and the friction associated with doing business and, especially, the costs and regulations associated with hiring people to work in a small concern. It looks as if the IRS wants to do just the opposite.Big mistake.This speaks to a larger problem with America’s regulatory regime. Running a business can be messy, and some regulations are naturally required. As these rules become more complex, however, more and more effort is required simply to comply with regulations. Large businesses have departments set aside for this sort of thing, but small operations of one or two simply don’t have the time — they’re too busy just keeping their business afloat. Small business is inherently messy, and bureaucrats hate this. But these are the jobs of the future — our bureaucracy should be reformed to suit the needs of our business, and not the other way around.