THE BOTTOM LINE:
STATES SHOULD GET GOVERNMENT OUT OF THE WAY, PAVING THE WAY FOR FUTURE ENTREPRENEURS.
Businesses are fleeing highly regulated, tax-heavy states in search of more business-friendly climates.1https://www.foxbusiness.com/lifestyle/ny-nj-exodus-to-florida-fueled-by-tax-hell-official So it is no surprise that businesses and workers are flocking to Florida.2–3 Governor Ron DeSantis’s leadership has kicked the state’s economy into overdrive, empowering entrepreneurs to create hundreds of thousands of new businesses in 2021 alone.4https://thefga.org/paper/desantis-kicked-florida-economy-into.overdrive
Florida is well-known as one of the best states for entrepreneurs to start a business.5–6 But rather than coast on the state’s reputation, House Speaker Chris Sprowls challenged his fellow lawmakers to “develop an Entrepreneurship Agenda that knocks down the barriers holding back all those untapped job creators.”7https://www.myfloridahouse.gov/Sections/Documents/loaddoc.aspx?DocumentType=Press%20Release&FileName=766 These barriers include obtaining approval from local governments in the form of permits and licenses, which create complicated and costly hurdles to starting a business.
With the support of Governor DeSantis, Florida lawmakers passed a landmark entrepreneurship agenda in 2021, removing barriers to job creators and encouraging new businesses. These reforms provide a roadmap for other states that want to empower entrepreneurs. These commonsense solutions include reforming home-based business laws, fast-tracking building permits, preempting local licensing requirements, and creating performance measures for workforce programs.
Reform Home-Based Business Laws
Roughly half of all businesses are based out of the home.8https://cdn.advocacy.sba.gov/wp-content/uploads/2019/09/24153946/Frequently-Asked-Questions-Small-Business-2019-1.pdf And for good reason. Home-based work helps improve overall quality of life, reduces costs, and provides flexibility.9https://www.thecgo.org/wp-content/uploads/2020/03/zoning-for-opportunity.pdf Companies like Disney, Hewlett-Packard, and Microsoft all began in the home.10https://www.businessinsider.com/successful-companies-started-in-basements-garages-bedrooms-2020-4
But local governments across the country are making it difficult for entrepreneurs to start a home-based business through complex and burdensome regulations. While variations exist across jurisdictions, local governments commonly dictate who may work in the home, how much of the inside of the home may be used for work, and what work activities are permitted within the home.
In Iowa, for example, Cedar Rapids prohibits retail sales in the home.11https://www.cedar-rapids.org/Chapter%2032%20-%20Zoning%20Ordinance_3.14.2021.pdf Urbandale does not allow any non-family, non-residents to work in the home.12https://codelibrary.amlegal.com/codes/urbandale/latest/urbandale_ia/0-0-0.9072 And Waterloo restricts the amount of the home that may be used to no more than one room or 25 percent of the floor space of the home, whichever is less.13https://cms6.revize.com/revize/waterlooiowa/document_center/Planning/Zoning%20Ord%205079%20021819.pdf
Brick-and-mortar businesses do not have to follow similar rules.
While local governments may regulate outside the home to maintain peace and quiet in neighborhoods, they should not hamper entrepreneurship by regulating work inside the home. Like Florida, states can empower their entrepreneurs by enacting statewide standards for how local governments regulate home-based businesses.14https://www.flsenate.gov/Session/Bill/2021/403/BillText/er/PDF Arkansas also passed a version of this reform this year.15https://www.arkleg.state.ar.us/Bills/FTPDocument?path=%2FBills%2F2021R%2FPublic%2FHB1416.pdf
State lawmakers should establish statewide standards for how local governments regulate home-based work by prohibiting common local regulations, such as restrictions on floor space or non-residents working in the home. This protects entrepreneurship while allowing cities to maintain authority over street parking, signage, and other neighborhood issues.
Fast-Track Building Permits
Local communities pay the price when government fails to act on time—businesses do not open, houses are not built, and workers cannot be hired.
Long processing times for permits drive up costs for developers, which raise housing prices for consumers.16https://www.flsenate.gov/Session/Bill/2021/1059/Analyses/h1059z1.RRS.PDF Slow turnaround times also discourage new construction in the future, which can hurt consumers and local communities in ways that are less pronounced but equally damaging.17https://www.flsenate.gov/Session/Bill/2021/1059/Analyses/h1059z1.RRS.PDF
Communities across the country are feeling the impact of inefficient government. Dallas, Texas amassed such a significant backlog of permit applications that the city potentially missed out on 849 new homes and thousands of dollars in new tax revenue.18–19 And an audit in Portland, Oregon found that the city did not meet its timeliness goals for initial reviews of permit applications once over a five-year period.20https://www.portland.gov/audit-services/news/2021/3/23/building-permit-review-audit
State lawmakers should follow Florida’s lead and fast-track the permit process to reduce red tape for entrepreneurs. Florida established a minimum processing time for local governments to issue building permits.21https://www.flsenate.gov/Session/Bill/2021/1059/BillText/er/PDF Florida also requires local governments to incrementally refund fees if permits are not timely issued.22https://www.flsenate.gov/Session/Bill/2021/1059/BillText/er/PDF Ten percent of the fee is refunded each day until the application is processed.23https://www.flsenate.gov/Session/Bill/2021/1059/BillText/er/PDF.
The Sunshine State also lets applicants know what they need to submit and where they are in the application process. To increase transparency, Florida requires local governments to post the review process and status updates for every application on their website.24https://www.flsenate.gov/Session/Bill/2021/1059/BillText/er/PDF This streamlines the application process, providing confidence to entrepreneurs and encouraging future development. State lawmakers can fast-track economic recovery by reducing red tape for building permits and providing clarity to the application process.
Preempt Local Licensing Laws
The number of workers requiring an occupational license has increased five-fold since the 1950s.25https://www.nber.org/system/files/working_papers/w14979/w14979.pdf Today, more than one in five workers in the United States require the government’s permission to do their job.26https://www.bls.gov/cps/aa2019/cpsaat49.pdf Licensing requirements are arbitrary, varying across states.27https://www.ncsl.org/Portals/1/Documents/employ/Licensing/State_Occupational_Licensing.pdf This creates confusion, increases bureaucracy, and hinders worker mobility.28https://thefga.org/wp-content/uploads/2018/11/Local-Licensing-Preemption-FAQs.pdf
Many states allow local governments to create new or additional licensing requirements on top of what is already required by the state.29https://thefga.org/wp-content/uploads/2018/11/Local-Licensing-Preemption-FAQs.pdf This compounds the negative effects of state licensure, creating even more red tape for entrepreneurs.
But if an occupation truly needs to be licensed for public health and safety, then it should be regulated at the state level in order to protect all state residents and create uniformity and certainty for workers. States already regulate occupations with licenses, and entrepreneurs should not have to double-check that box.
Florida prohibits local governments from creating and enforcing local licensing requirements.30https://flsenate.gov/Session/Bill/2021/735/BillText/er/PDF This provides consistency for entrepreneurs and reduces compliance issues at the local level, making it easier to do business. State lawmakers can and should remove local barriers to work.
Create performance measures for workforce programs
When workforce and welfare programs are not work-centric, it makes it more difficult for people to move away from government dependency and toward self-sufficiency. Bureaucrats admit that taxpayer-funded programs related to job training tend to overlap and provide similar services to similar populations.31https://www.gao.gov/assets/gao-19-200.pdf Needless overlap wastes taxpayer resources, fosters inefficiency, and creates administrative barriers to work. A 2017 study published by the U.S. Department of Labor found that filling out redundant paperwork for multiple programs frustrated job seekers, which exacerbates other administrative problems.32https://www.dol.gov/sites/dolgov/files/OASP/legacy/files/Customer-Experience-Summary-Report.pdf
While job training programs typically implement different types of performance measures, states should follow Florida’s lead by re-aligning funding to promote greater accountability.33https://www.flsenate.gov/Session/Bill/2021/1507/BillText/er/PDF Increasing transparency in workforce and welfare programs will improve administration, which will move more people toward work.
State lawmakers can protect taxpayer investment in workforce and welfare programs by requiring bureaucrats to track transitions out of government dependency. Like Florida, states should require program or service contracts related to job training to be evaluated based on metrics like participant completion, job attainment, earnings, and transitions out of programs.34https://www.flsenate.gov/Session/Bill/2021/1507/BillText/er/PDF
To remove administrative barriers to work, Florida requires state and local bureaucrats to use a common intake form and case management system.35https://www.flsenate.gov/Session/Bill/2021/1507/BillText/er/PDF This facilitates coordination across levels of government, helping to streamline job search and placement.36https://wdr.doleta.gov/directives/attach/TEN/TEN_13-20.pdf States should take steps to implement a common system for job-training programs in order to help people move toward self-sufficiency and businesses fill open jobs.
BOTTOM LINE: States should enact commonsense reforms to empower entrepreneurs and boost economic recovery.
Florida’s entrepreneurship agenda gets government out of the way and ensures local governments do not hold back entrepreneurs. This means more economic opportunity for workers and fewer “help wanted” signs for local businesses. States should enact commonsense reforms to empower their entrepreneurs and propel economic recovery.