Regulations Hamper Small Urban Businesses

February 13, 2001

In major American cities, regulatory barriers thwart new small business development, especially affecting those low-income groups most needing help -- minorities, new immigrants and single parents. That's according to a new study by the Reason Public Policy Foundation in association with the Dallas-based National Center for Policy Analysis (NCPA) and other think tanks.

Even in business-friendly Dallas, the report found some regulations were particularly hard on minorities, recent immigrants and stay-at-home single parents. For example:

  • Dallas places strict licensing requirements on African-American style hair braiding, often requiring costly formal training in unrelated areas; thus, Dallas hair braider Dana Brantleye received a criminal conviction for operating without a cosmetology license.
  • Dallas regulations hamper home-based businesses, including preventing them from selling any products on the premises and advertising either on or off the premises via a sign, display or telephone directory ad.

Dallas's regulation of taxicabs makes it nearly impossible for an entrepreneur to start service:

  • For example, new taxicab companies must have a minimum of 25 taxicabs, adding a minimum of $6,000 in licensing fees and eliminating the opportunity to enter the market with one car or on a part-time basis.
  • Dallas also requires that a company's cabs be no older than five years old, and that they be inspected three times a year.
  • After accounting for insurance for all 25 cabs plus other regulatory requirements, the regulatory cost of starting up a taxicab company in Dallas is more than $245,000.

In addition to Dallas, the study examined regulatory environments in Atlanta, Boston and Los Angeles.

Source: Samuel R. Staley, Howard Husock, David J. Bobb, H. Sterling Burnett, Laura Creasy, and Wade Hudson, " Giving a Leg Up to Bootstrap Entrepreneurship: Expanding Economic Opportunity in America's Urban Centers," Policy Study No. 277, January 2001, Reason Public Policy Institute, Georgia Public Policy Foundation, National Center for Policy Analysis and Pioneer Institute for Public Policy Research.

 

Browse more articles on Tax and Spending Issues