Do Special Exemptions Protect Businesses' Freedom?

It’s good to see businesspeople fighting back against destructive regulations. But sometimes what they’re fighting for is less than glorious.

Take banker John Buhrmaster, from the village of Scotia in upstate New York. Three-quarters of what he does as CEO of a small bank there is now compliance, according to the Albany Business Review. “Since 2008, regulations have been popping up like crazy,” he complains. He wants to spend less time and money on rules and more on his depositors and borrowers. So he wants the government to get off his back.

So far, so good. But instead of arguing that banking regulations violate his rights and ought to be repealed, he’s asking for special exemptions for small banks. As chairman of a group called Independent Community Bankers of America, he’s backing “tiered regulation.” That means big banks and small banks would have different rules. They have “two different business models,” he argues.

Or take cigar maker Eric Newman, president of the last cigar company with a factory in Tampa. His employees make cigars on hand-operated machines, and he’s concerned that the FDA’s proposal to regulate cigars like cigarettes would put him out of business . His old-fashioned equipment would face scrutiny (remember what the FDA tried to do to cheese makers ?). And in an industry that has come to rely on new products, he’d have to put every new product through 5,000 hours of tests.

So is he pushing to deregulate tobacco, arguing that people have the right to make and sell whatever recreational substances they want? Ha! He’s apparently not even trying to stop the FDA from regulating cigars. What he and local congresswoman Kathy Castor are seeking is to get Newman’s cigars included in a regulatory exemption for premium cigars. Nearly 300 comments, many using the same text, have been submitted to Regulations.gov specifically mentioning Newman’s company . Fifty of them, mostly anonymous but some signed by named individuals, call the factory a “working museum.”

So what are we to make of these efforts, morally speaking? Frankly, I’m not sure. There are things to be said for and against them.

It’s understandable why (relatively) small businesses like Buhrmaster’s bank and Newman’s cigar company would seek special protections instead of standing on the principles of rights: the administration obviously doesn’t respect the principles of rights, but it might be convinced to have mercy on small, community-based businesses.

And yet in the long run, special niches are vulnerable . The government can come along at any time and change them. If you want security, you need the principles of rights, and arguing for special privileges makes it harder to advocate those principles.

The pursuit of special exemptions is troubling because equality under the law is an important value. Exempting one business from an unjust law that harms another makes matters worse for the law’s victims, because they have to compete with a business that doesn’t share the handicaps imposed on them. And especially when an exemption is grounded in a business’s historic character, it amounts to treating some citizens as more important than others, which is proper for individuals to do but dangerous for governments to do. The greatest protection individual rights can have is the recognition that when the government violates one citizen’s rights, it threatens all our rights, and special exemptions undermine the recognition of this principle.

Yet unjust laws that nominally treat businesses equally can have unequal impacts. An additional paperwork burden for a big bank may be a matter of adding another lawyer, which, in its context, may be a small cost; for a small bank the same paperwork may take a large chunk of the CEO’s time. A testing requirement for new products may be little burden on a big cigarette manufacturer whose customers want to keep buying identical cigarettes, but a tremendous burden for a cigar company whose customers like trying new and interesting cigars. This is one reason big companies often support regulations: They can withstand them more easily than their smaller competitors.

More fundamentally, adding an exemption means some people don’t get their rights violated (in certain ways) who otherwise would. In that respect, exemptions are clearly good. Yet they are troubling because of the legal inequality involved.

Exemptions reflect the fundamental injustice of the regulated economy. When the law does nothing but uphold individual rights, there is no case to be made for special exemptions. Rights are the principles we need the law to uphold for each of us equally.

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