When license fees become a tax
This week at the MacIver Institute, I explain how state license fees for professions and trades have really become a tax, taking in millions for the general fund.
State Rep. Tyler August has found another way state government hurts small businesses and the middle class in Wisconsin. The state is collecting too much money to administer professional and trade licenses. The fees for licenses have become a hidden tax on entrepreneurship and hard work.
Beginning under Governor Jim Doyle, the state Department of Safety and Professional Services (DSPS) in the 2009-2011 biennium changed the way professional license fees were determined. For the first time, instead of being set by the legislature, the fees were set administratively.
Fees for professional licenses generally went up. For example, a professional engineer saw the bill go up 41%, while a professional nurse’s license fee went up 24%. Surprisingly, members of the state legislature didn’t react to the over-collection issue when massage therapists’ licenses jumped by 55%.
Since this change, the amount DSPS has been contributing to the general fund has gone up. The two fiscal year average contribution jumped from $2,675,150 (2007 to 2009) to $5,564,695 (2009-2011). That amount is above the 10% of license fee collections that is already mandated to go the general fund.
August proposes a 25% cut in license fees across the board to eliminate this tax on entrepreneurship.