Kansas City officials deserve credit for wanting to update and revamp the city’s business and occupational licensing system. By all accounts, the current license schedule is inconsistent and arbitrary, a hodgepodge of rules adopted over the past century. The Star’s reporting on this issue has shown the difficulty involved with properly interpreting and enforcing the system, as well as highlighting the absurdity of items like the $10 annual pool table tax. When considering how to reform the inequities of an outdated licensing system — which still enforces special licensing laws for radio and television repairmen and places special assessments on shoeshine parlors — it is both tempting and understandable for officials to follow the typical route of task forces, public meetings, and committee hearings. Following this course to the end would almost surely involve simplification and tax increases, either through higher rates or a wider collection base. Unfortunately, few people look at a licensing system that everyone agrees is broken and say, “Let’s scrap the whole thing.”

Kansas City already has higher taxes than its neighbors. When you consider the total cost of Kansas City’s earnings tax, sales tax, property tax, special parkway and trafficway assessments, utility taxes, and more, the total tax burden within the city is clearly higher than outside. That is all the more reason for city officials to consider getting rid of business and occupational licenses entirely. It would be one concrete way that Kansas City could signal to entrepreneurs that it is open for business — a comparative advantage it could quickly have over other cities and states.

There is an important difference between business and occupational licenses. The former is a fee imposed on any business that operates within a locality, while the latter generally impose special requirements on people before they can legally practice a certain occupation. Economically, occupational licenses are harmful to consumers, because they limit entrants to certain professions and decrease competition for existing practitioners. Did you know that you can go to jail for up to 60 days for repairing a television in Kansas City without passing an exam beforehand and being approved by a city board made up of your competitors?

In 1997, a commission somewhat amazingly suggested getting rid of the entire system and replacing it with a higher tax on business profits. That suggestion went nowhere, but it was a nod in the right direction. For those desiring to maintain at least a portion of the revenue generated by the current system, a general and flat business license is preferable to a scaled license based on gross revenues, because it encourages growth and expansion rather than punishing success with higher fees. A low and flat business license tax would also lower the amount Kansas City currently spends each year on enforcing and collecting taxes from its overly complicated licensing system.

Eliminating all the occupational licenses that are legally able to be rescinded, and reforming the business license system into a simple one- or two-tiered low annual fee, would serve as an incentive for businesses to open, move to, or remain in Kansas City. The idea that businesses must pay an annual license fee to the city in order to contribute their “fair share” to the community is ludicrous. Unlicensed businesses would still pay commercial property tax rates and surcharges, taxes on profit, earnings taxes withheld from employees, and sales taxes submitted on behalf of customers.

Economic activity benefits the city whenever it occurs, whether directly or indirectly. Rather than ensuring that every business is properly licensed and taxed before it operates, Kansas City officials would better serve their constituents by making it a priority to be as open to business operations as possible. One way to do that is by allowing a free market and consumer choice to determine which businesses operate in Kansas City, instead of restricting economic activity through licensing codes.

David Stokes is a policy analyst with the Show-Me Institute, a Missouri-based think tank.