Small Business Hit With Regulatory Costs

On the eve of the newly passed small business assistance bill (TARPll?), the Office of Advocacy of the SBA released a new report on the impact of government regulations on small business. The timing is somewhat ironic in that the report discusses the onerous cost demands being forced on small business–while the new bill offers to cut taxes…taxes on what; I’m not sure.

Just for a benchmark, this new report tells us that the cost of federal regulations for all businesses has increased to $1.75 TRILLION per year, as of 2008. That number breaks down to $7,755 per employee for large firms (500 or more employees) and $10,585 per employee for small firms (fewer than 20 employees). That is a 36% difference.

Interestingly, it appears from the report that a good portion of this cost is for paperwork required by various federal regulations (and bureaucracies). For many of the regulations there is no differentiation between small firms (fewer than 20 employees) and large firms (over 500 employees). They all have to adhere to the same reporting requirements.

It just seems to me that in the face of our current economy, the bill that was just passed totally missed the boat if the intent was to get small business going in order to improve the economy. Passing a bill to reduce some of the paperwork demanded by federal regulations would have accomplished much more.

In addition, are there any small businesses out there that are not concerned about the cost of the upcoming implementation of the new healthcare reform law in 2014?

Is it any wonder that entrepreneurship in the U.S. is falling behind the rest of the world? Or, does anyone even care?


2 thoughts on “Small Business Hit With Regulatory Costs”

  1. AND…let’s see, I buy my commercial insurance policy from an agent who is guess what? a small business, I buy parts from several supply houses who are small businesses or a branch of a large business, I buy oil from another, cleaning supplies from one, office supplies from one and don’t you think that they, like me are passing the costs of all this regulation on to the end user??? What this really means is the average American consumer is absolutely getting hosed!! It’s no wonder we are all sitting here stunned, wondering if we should spend a buck or not, or if we do, what will it even buy in todays economy. Wait until hyper-inflation gets here!!

    1. Steve – Politicians obviously do not understand simple economics—when they raise the cost for small businesses to operate, that money must come from somewhere…or the business goes bankrupt. The only place it can come from is the customer. Lawmakers don’t need a degree in economics to understand that.

      I also just read that credit for small business and consumers is just as hard to get as ever, while big business is selling bonds and borrowing money like crazy to hoard cash…and paying under 1% interest for the money. Corporations now sit on a combined cash cushion of over $1.6 TRILLION—more than the GDP of many countries. What money they are spending is on equipment (that was manufactured overseas) to improve efficiency, reduce manpower, and forestall the need to hire workers.

      It’s a crazy time right now, and our politicians are running around playing “Chicken Little.”

Leave a Reply