The Impact of Regulatory Costs on Small Firms: the costs of federal regulations are disproportionately burdensome for small firms.

• Position: The Impact of Regulatory Costs on Small Firms - Report

On September 21, 2010 the Small Business Administration (SBA) Office of Advocacy released a report titled The Impact of Regulatory Costs on Small Firms (www.sba.gov/advo/research/rs371tot.pdf). According to the report, compared with larger firms, small businesses still face a disproportionate burden when it comes to the costs of federal regulations.

The report's author, W. Mark Crain, presented the report at the Office of Advocacy's symposium celebrating the 30th anniversary of the Regulatory Flexibility Act. 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. The report's findings are consistent with those of previous studies on this topic conducted by the Office of Advocacy.

An Unfair Burden

"Small businesses still face higher costs when they encounter government regulations, compared with larger firms," says 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 percent difference and that is an unfair burden to place on American small business."

The costs of environmental regulations appear to be the main determinant of 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 in large firms.

Sector-Specific Findings

The report details the distribution of regulatory costs for five...