Regulation hits small firms hardest

Rather than larding the U.S. federal budget with a bogus "stimulus" package, American experts argue the best stimulus would be wide-ranging deregulation. According to a new report from the Office of Advocacy at the Small Business Administration:

  • Last year Americans spent $843 billion to comply with federal regulations.

  • That comes to $8,164 per household – in addition to the $19,613 share each household contributes directly or indirectly to federal revenues.

  • Regulatory compliance takes eight percent of gross domestic product.

    Nor is the burden shared equally:

  • Firms with fewer than 20 employees face an annual regulatory burden of $6,975 per employee – 60 percent above that facing a firm employing more than 500 employees.

  • Environmental rules cost large firms $717 per worker – but $3,328 at small firms.

  • Large firms are hit for $665 per worker for tax paperwork – while firms with fewer than 20 employees pay $1,202.

  • Workplace rules cost big companies $698 and small companies $829.

    Costs don't necessarily vary much based on company size, but larger firms can spread the costs over more employees. The trend is only reversed for economic regulation, such as tariffs, where small firms pay $1,616 and large ones $2,485.

    Source: Doug Bandow (Cato Institute), Real Stimulus? Remove Burden of Regulation From U.S. Firms, Investor's Business Daily, November 20, 2001; W. Mark Crain and Thomas D. Hopkins, The Impact of Regulatory Costs on Small Firms, Office of Advocacy, U. S. Small Business Administration, RFP No. SBAHQ-00-R-0027, 2001.

    For report text
    For more on the Burden of Regulations

    RSA Note:The Laws affecting small businessseries prepared by the Free Market Foundation and published by the Friedrich Naumann Foundation documents the effects of regulation on South African small businesses. Costs of compliance with regulations are not more onerous only for small businesses but for all businesses in developing countries. The per-employee cost of R6 975 for regulatory compliance by U.S. small businesses is well above South Africa’s per capita GDP. Yet South African politicians and civil servants insist on importing so-called regulatory “best practice” copied from the advanced countries. This imposes an intolerable burden on the businesses and retards economic growth.

    Eustace Davie, Director, FMF.

    FMF Policy Bulletin\27 November 2001
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