Washington, D.C. – U.S. Senator Olympia J. Snowe (R-Maine), Ranking Member of the Senate Committee on Small Business and Entrepreneurship, today criticized the Obama Administration for failing to act to reduce the disparate burden small businesses face in complying with Federal regulations.  A new report from the Small Business Administration’s (SBA) Office of Advocacy released yesterday highlights that regulatory compliance costs small firms $2,830 more on average per employee than it does large firms, representing a 36 percent difference, resulting in negative consequences for the U.S. labor market, small business job creation, and national income.

“I find it frustrating that the Administration has failed to take any consequential steps to reduce the regulatory burden small businesses face, despite continued statistical evidence that these firms are paying far greater costs than their larger counterparts,” said Ranking Member Snowe.  “As last Sunday marked the 30th anniversary of the signing of the landmark Regulatory Flexibility Act, the Administration should recommit itself to finding ways to reduce the substantial and disproportionate regulatory encumbrance small businesses face, whether tax, environmental, or other.  Given that small businesses are the drivers of our economic growth, the Federal government must be on their side, and must provide them with the tools necessary to lead us out of our prolonged morass, rather than impeding their ability to create jobs and expand operations through reams of red tape and new paperwork burdens.”

The report released yesterday, titled, “The Impact of Regulatory Costs on Small Firms,” found that the annual costs of Federal regulations overall totaled over $1.75 trillion in 2008, with small businesses employing less than 20 employees facing a disproportionate share of the federal regulatory burden.   To comply with all Federal regulations, firms with fewer than 20 employees spend $10,585 per employee, compared to $7,755 for firms with 500 or more employees. 

The report finds that the cost of environmental regulations per employee is more than four times higher in small firms than in large firms, and the cost of tax compliance per employee is three times higher.   The report states that 89 percent of all firms in the United States employ fewer than 20 workers and notes that “[i]f federal regulations place a differentially large cost on small business, this potentially causes inefficiencies in the structure of American enterprises, and the relocation of production facilities to less regulated countries, and adversely affects the international competitiveness of domestically produced American products and services.”

“Recognizing the disproportionate burden that regulatory compliance has on small businesses, I fought relentlessly to introduce four amendments in the financial regulatory reform bill that are of essential value to small businesses,” said Ranking Member Snowe.  The four amendments introduced by Senator Snowe were designed to temper onerous bank regulations and improve access to credit for small businesses.  Specifically, Senator Snowe’s amendments:

  • Require the newly-formed Consumer Financial Protection Bureau (CFPB) to take into account seasonal businesses which access credit through home mortgages when crafting regulations;
  • Create a safe harbor so that small businesses which do not securitize their debt and are not significantly engaged in financial business will not be regulated by the CFPB;
  • Strike Section 1071 of the Dodd bill, which would require technical and over-broad reporting for banks down to each individual ATM and census tract; and
  • Create small business advocacy review panels within the CFPB through the Regulatory Flexibility Act so that the CFPB fully considers small businesses economic effects when it promulgates new regulations.

“Requiring the Consumer Financial Protection Bureau to convene these small business advocacy panels any time it considers a potential rule that would significantly impact a substantial number of small businesses is a critical step in protecting the interests of small business.  The findings from the SBA’s report only reinforce the need for these panels,” said Ranking Member Snowe.