Center for Free Enterprise
Governor Herbert declared November 29th as “Small Business Saturday.” This was a well needed reprieve from the anti-business Thursday just one week prior when the Utah Insurance Department attempted to shut down online HR startup Zenefits, or the previous anti-business Tuesday when the Salt Lake City Council decided to impose unnecessary regulations on ridesharing apps Uber and Lyft. When it comes to creating a business-friendly regulatory environment in Utah, government officials know how to talk, but do they know how to walk?
We applaud the Governor for his recent work to reduce administrative regulations on business but are left to wonder, in light of recent events, if the momentum is beginning to sputter.
In 2013, a San Francisco startup, Thumbtack, surveyed 12,000 small business owners around the country to find out which states provided the best environment for business. They found that Utah was the most business friendly state in the nation and subsequently decided to locate their customer support operation here where they are now growing rapidly. Utah received an A in the regulatory category in the 2013 survey and improved to an A+ in 2014, indicating low regulatory burdens on small business in Utah. Utah has also ranked as the number one state for business for three years in a row by Pollina Corporate Real Estate and tops the list in a number of other rankings.
Next Tuesday, the Salt Lake City Council will be voting on a proposed change to its ordinances regarding ground transportation services.
After Libertas Institute broke the news of $6,500 citations being given out to Lyft and Uber drivers operating outside the parameters of existing ordinances, which neither contemplate nor address ride-sharing services, heightened public attention brought significant opposition to the city’s treatment of this innovative new service.
Both of these companies have now publicly opposed the proposal, arguing that it imposes unnecessary and onerous burdens.
Earlier this week, a new audit of the Governor’s Office of Economic Development (GOED) was announced and discussed, in which the government agency was accused of manipulating data, misleading the public, and giving special treatment to certain businesses over others.
GOED’s own press releases support the latter allegation.
On August 14, GOED published a press release in which they announced a new tax credit incentive awarded to Overstock, a popular online retailer headquartered in Salt Lake County. Upon committing to creating 333 new jobs over the next 10 years, with wages and benefits at 200 percent over the county average wage, Overstock was awarded a 20% tax credit by GOED over 10 years.
Standing alone, this is likely a welcome incentive for Overstock and a reduction of their tax burden which will facilitate job creation and business growth. Stacked against another incentive, however, it becomes clear that Overstock (and many other companies competing for employees) has been placed at a financial disadvantage.
A newly released audit of the Governor’s Office of Economic Development—an institution of which we have often been critical—claims that their primary tactic to lure business into the state entails “questionable incentive awards.”
The audit also alleges corruption within the office in the form of manipulation of data. “GOED regularly reports inaccurately” on certain items, and “provided special treatment for some companies by altering post-performance assessments for companies that failed to meet GOED’s contractual threshold.” Further, the audit alleges that GOED has:
- used existing company employees to inflate wages of new employees in order to gain corporate incentive awards;
- used incorrect benchmarks to improperly issue an economic development tax increment financing award;
- removed low-paying jobs from averages; and
- handed out incentives to companies that failed to meet the wage criteria under their contracts with the state.
House Bill 105 from this previous legislative session had two important but distinct parts. The widely popularized portion related to legalizing cannabis extract for medicinal use, and earlier this year the Department of Health created administrative rules to implement this program.
The second portion of the bill, which few realize was included, authorized the Department of Agriculture, or any qualifying higher education institution, to “grow or cultivate industrial hemp for the purpose of agricultural or academic research.” Last week, the department issued its proposed rules to administer this program.
Upon review of the proposed rule, Libertas Institute has identified four problematic portions that deal with the department exceeding the authority they were granted under passage of H.B. 105. We have issued a letter, embedded below, to the Department of Agriculture seeking amendments to the proposal prior to its final enactment.
Salt Lake City, enforcing its arcane, anti-free-market transportation laws, has been imposing $6,500 fines on Lyft and Uber drivers. City officials argue that its laws are necessary for public safety, which is false.
To help ferret out drivers operating in violation of these laws, Salt Lake City employs secret shoppers to hire drivers and then report them to city officials. Correspondence obtained by Libertas Institute through an open records request includes numerous emails from these secret shoppers.
One such shopper, whose name was redacted, reported the following after her first experience using Lyft in April:
In an exclusive interview published last month, we broke the story regarding Salt Lake City’s heavy-handed fines being imposed on Lyft and Uber drivers operating without the city’s blessing. Citations amounting to $6,500 and more have been issued to drivers for daring to drive consenting passengers without the drivers having jumped through the city’s regulatory hoops.
Records obtained by Libertas Institute this week suggest more reasons why the city may be resistant to the innovative disruption that these ride-share companies bring. In the last fiscal year, Salt Lake City received $362,361.65 in fees from the three authorized taxi companies for the ~200 authorized vehicles operating throughout the city. This is in addition to license fees paid by the three companies to the city.
“Freedom in capitalist society always remains about the same as it was in ancient Greek republics: Freedom for slave owners.” —Vladimir Lenin
Labor Day is an interesting holiday for those that love liberty. For some, Labor Day reeks of the success of the socialist workers movement and should be eschewed; for others, it is merely a celebration of those whose labor is critical to our diverse economy. I propose that for those that love liberty, Labor Day can be a positive holiday that recognizes the importance of voluntary exchange in a free society. While we disagree with Lenin’s assessment of freedom in a capitalist society, we understand the source of his frustration.
Capitalism in Lenin’s view is more about individuals than about a system. Lenin and other socialists saw powerful individuals as “capitalists.” These were the individuals who owned capital or the means of production. By owning machines and factories the capitalists could leverage their ownership into profits by hiring wage laborers to carry out production. In Lenin’s view, this employment relationship was exploitative of the worker in the same fashion as slavery. However, there is a key difference. In the slave relationship the master literally owns the slave and can coerce the slave’s labor to the master’s profit. In contrast, the employment relationship in a capitalist system is voluntary. The worker owns their labor just like the capitalist owns their factory. Thus, a worker voluntarily offers their labor to the owner in exchange for the owner’s voluntary payment of wages. If the owner feels they can profit more from the worker’s labor than from the wages they offer to pay, then the exchange is beneficial for the owner.
Under Utah law, cities are authorized to require permits of business owners—including home business owners—for “purposes of regulation and revenue.” A bill attempting to restrict that authority, specifically carving out an exemption for at-home business owners, struggled in committee and was referred to interim study.
That interim study came in the form of another committee meeting a few weeks ago, in which the same debate was had; many legislators struggled to understand how or why the legislature should “impose” something upon the cities. They voiced objections to the thought of “micro-managing” cities, and indicated a preference to allowing cities to do as they please.
What wasn’t brought up, however, was the fact that the legislature has in the past—in many cases—restricted the authority of local governments to ensure a state-wide policy is followed rather than enabling a patchwork of different treatment for citizens around the state. As it relates to the home business exemption, this also makes sense. Why should a (very part time) seamstress earning $200 a year on the side be forced to pay a $150 license fee for the privilege of working in her own home, while another seamstress earning the same amount in another city be free from that burden?
As mentioned, there are many instances in Utah law when cities and counties are prohibited from doing something. Here are a few examples.
Utah law explicitly recognizes the “individual right to keep and bear arms” as “a constitutionally protected right under Article I, Section 6 of the Utah Constitution.” As such, “the Legislature finds the need to provide uniform civil and criminal firearm laws throughout the state.”
Part of that uniform law includes the following:
(2) Except as specifically provided by state law, a local authority or state entity may not:
(a) prohibit an individual from owning, possessing, purchasing, selling, transferring, transporting, or keeping a firearm at the individual’s place of residence, property, business, or in any vehicle lawfully in the individual’s possession or lawfully under the individual’s control; or
(b) require an individual to have a permit or license to purchase, own, possess, transport, or keep a firearm.
Many cities might like to enact policy restricting or regulating firearm possession and transportation. Some would jump at the chance to collect revenue by requiring a permit and license. This power is denied to them by the legislature, creating a state-wide policy that recognizes and protects the right to acquire and possess firearms.
Andrea Scannel, a Utah mother, was at Mount Logan Middle School for a government-administered “free lunch” program for her three-year-old. While there, she nursed her infant. She was given a letter by the school’s principal, delivered by an employee, passive-aggressively inviting her to “use discretion” and to “find a way to discreetly feed the baby, whether with a small blanket or in a more private area.” Andrea was taken aback by the “request,” later commenting: “I just never expected anyone to have an issue with me feeding my baby while everyone is there to feed their children.”
Utah law states, “A woman’s breast feeding, including breast feeding in any place where the woman otherwise may rightfully be, does not under any circumstance constitute an obscene or lewd act, irrespective of whether or not the breast is covered during or incidental to feeding.”
It further stipulates that local governments “may not prohibit a woman’s breast feeding…” Some of the more conservative cities might otherwise wish to regulate how much breast can be exposed, and when and where, but this power is denied to them “irrespective of whether the breast is uncovered during or incidental to the breast feeding.” Mothers around the state now take comfort in a general recognition that their nursing of their infants is a legally protected activity.
One might imagine what Provo, Utah would do in regards to regulating alcohol availability if it had the opportunity, but Utah law states that it, and other cities, “may not regulate in relation to” an issue “related to alcoholic product control” if state law already addresses that issue, unless the legislature “expressly granted” authority to do so.
If the legislative committee reviewing the business licensure bill imposed their same logic on this issue, some cities such as Park City and Salt Lake City would have free-flowing booze while others, such as Provo or Orem, would be dry cities. The legislature has previously decided on requiring a more uniform set of policies throughout the state, denying authority to the cities to act contrary to its edicts.
Just a few years ago, the legislature passed a bill that prevents local governments from enacting “an ordinance or policy that limits or prohibits a law enforcement officer, local official, or local government employee from communicating or cooperating with federal officials regarding the immigration status of a person within the state.”
Whereas a more liberal city council might want to prevent coordination such as this to provide sanctuary to so-called “illegal immigrants,” cities and counties around the state have been denied the ability to intervene.
More examples exist, but these suffice to show that the legislature is perfectly comfortable establishing state-wide policies on matters where there otherwise might be diverse interests among Utah’s 243 cities and towns.
Of course, just because the legislature has done something in the past is not reason on its own to repeat it in the future. However, in cases where fairness and rights are involved, it makes more sense to have a uniform policy that recognizes and protects that right.
The right to work has long been recognized by the courts in Utah. For example, in Leetham v. McGinn: “The right to engage in a profession or occupation is a property right, which is entitled to protection by the law and the courts.” In another case, McGrew v. Industrial Commission, we read this:
[O]ne may be said to have a special property in his profession or calling by means of which he makes his support, and he can be deprived of it only by due process of law. . . . . The right to work, the right to engage in gainful occupations, the right to receive compensation for one’s work are essentially property rights. So too is the right to enjoy the benefits resulting from the work of one so employed. So also the right to engage in commerce or in legitimate business is property.
For this reason, we support a state-wide restriction on a city’s ability to siphon money from its residents through permits for operating businesses inside the home that do not impact the public. Legislators expressing concern over stepping on the toes of cities seems, in the end, to be more a concern of money than authority; local governments are not going to give up an estimated $4 million in revenue without a fight.