Federal Regulations Costing Small Businesses

Small businesses still face a disproportionate burden when it comes to costs of federal regulations, compared to larger firms according to a study from the Small Business Administration’s Office of Advocacy.

The purpose of the study was to look at the overall cost of federal regulation on small business, not to evaluate the benefits of federal regulations.

“Small businesses still face higher costs when they encounter government regulations compared to larger firms,” said Winslow Sargeant, Chief Counsel for Advocacy.

“Today’s report shows that on a per employee basis it costs small firms $2,830 more than larger firms to comply with government regulations. That is a 36% difference and that is an unfair burden to place on American small business.”

The cost of environmental regulations appear to be the main driver when determining the severity of the disproportionate impact on small firms. Compliance with environmental regulations costs 364 percent more in small firms than in large firms. The cost of tax compliance is 206 percent higher in small firms than the cost in large firms.

“While legitimate regulatory oversight is necessary in many areas, the current framework places an undue burden on small firms and reduces opportunities for expansion and growth,” said Thomas Hopkins, professor of economics and former dean of the E. Philip Saunders College of Business at Rochester Institute of Technology. 

“By streamlining regulatory requirements, reducing duplication and improving efficiency in the overall system, we can begin to reduce the cost burden and make the regulations themselves more effective.”