Legislative Session Good for Business

April 7th, 2006 by Leave a Comment

By Kelly McCutchen

Georgians won’t know who this year’s political winners will be until November, but the state’s small businesses were the clear winners in the legislative session. And that’s not small potatoes: More than 150,000 small businesses employ nearly one-third to nearly one-half of all working Georgians, depending on the definition of a small business.  

These small businesses provide growing job opportunities, innovation and marketplace competition – unless, that is, they’re stifled by overregulation. 

One of the most important actions during the session wasn’t even a new law. It was Governor Perdue’s executive order to state agencies to provide regulatory flexibility for small businesses. Overt tax issues receive the majority of attention, yet complying with numerous and complex rules and regulations is an invisible tax on small businesses, which operate without an in-house team of attorneys to navigate the bureaucratic maze. 

The Governor ordered agencies to examine both new and existing rules and regulations to “prevent unintended anticompetitive impacts and to ensure that less burdensome alternatives are explored.” Georgia should follow South Carolina’s lead, where an active, all-volunteer commission has already made great inroads in cutting through red tape. 

A textbook example of overregulation was highlighted in the legislative debate concerning African hair braiding, one of the most highly – and needlessly – regulated occupations in the state. Despite the minimal health and safety concerns, Georgia hair braiders have had to acquire a cosmetology license and pay for more than 1,500 hours of training – more than the minimum training required to become a police officer! 

Hair braiding can be a first step on the ladder of economic opportunity for Georgians lacking other marketable skills, but for many already-talented Georgia hair braiders seeking a living in this profession, the “training” was unaffordable. Bipartisan and commonsense efforts by Senator Johnny Grant, Rep. Georganna Sinkfield and others led to legislation exempting hair braiders from these onerous requirements.  

Advances over the last decade in telecommunication technology and the Internet have been a boon to small business. The Internet enables a small company to market and sell worldwide with minimal overhead expense. Advanced communications allow entrepreneurs to run their companies while traveling, telecommute to avoid traffic congestion or bring higher-paying jobs to many small towns across our state. Well-intentioned efforts to encourage competition through regulation at the state and federal level, however, in effect stifled investment in new facilities, higher capacity and new products. 

By prohibiting state regulation on top of existing federal regulation of broadband service and wireless service, legislators appropriately acknowledged that a competitive marketplace is the best regulator of cost and quality. This is particularly good news for consumers who will benefit as new and existing companies and technologies vie for their business.

Prior to action by the Legislature this year, no small business was safe from government taking of their land through eminent domain. The City of Stockbridge, Georgia, acting in the void left by the U.S. Supreme Court’s astonishing 2005 decision in the Kelo v. New London case, demonstrated the very real danger to property rights in Georgia by their attempt to condemn a small florist shop. Not only did Georgia’s existing eminent domain law allow local government to condemn private land for private development and use, it also allowed condemnation to be justified by “blight,” defined so vaguely as to mean almost anything. 

Justice Clarence Thomas’ dissent in the Kelo case was a persuasive argument that nuisance law, not eminent domain, is the appropriate remedy for blight. Senator Jeff Chapman and other legislators sought to restore this protection to property owners. That effort narrowly failed, although the Legislature did significantly tighten the definition of what constitutes “blight.” Disappointingly, in the hasty drafting of a Constitutional Amendment that comes before Georgians in November, the definition of blight isn’t protected in the Constitution; instead, it remains at the mercy of future legislatures. 

In the end, the Legislature passed one of the strongest eminent domain reforms in the nation. Small businesses and homes can no longer be taken by local government for economic development purposes, unelected officials may no longer authorize eminent domain, and the rights of landowners in the process are enhanced. 

A key component of the American Dream is the ease with which any American may take an idea and turn it into a private business. Small business is a vital part of the fabric of every community. Many fail, but many more spring up to fill their place. At one time, even Coca-Cola, UPS and Home Depot were small businesses. By loosening the regulatory stranglehold, Georgia has taken another step toward improving the business climate that will reap rewards for a long time to come. 

Kelly McCutchen is executive vice president of the Foundation, an independent think tank that proposes practical, market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the views of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation (April 7, 2006). Permission to reprint in whole or in part is hereby granted, provided the authors and his affiliations are cited.

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