Congress has an opportunity to cut red tape for small businesses
© Getty Images

Government regulation consistently tops the list of challenges faced by small business owners and entrepreneurs, and elected officials on both sides of the political aisle constantly pledge to reduce red tape and bring more sense to the federal regulatory system. Backing up those pledges with action is critical to our economy, as small businesses are disproportionately burdened with the higher costs and complexities associated with regulation. In turn, these burdens stunt growth, investment, new business creation, and the job-creating prowess of small firms.

On May 17, the U.S. Senate Homeland Security and Government Affairs Committee will markup several bills to modernize how the federal government creates the rules that small businesses have to operate under, improve transparency and accountability during that process, require the use of cost-benefit analysis to ensure regulations are effective, and provide entrepreneurs with a real voice and protection in the regulatory process. The bills would close loopholes exploited by federal agencies to sidestep actions that are required to shield small businesses from over-regulation.


While all these reforms are critical to fixing a regulatory system that has become out-of-touch and outdated, the effort to make the system more responsive to how regulations impact small businesses is vital to improving America’s environment for starting and growing a business. Sen. James LankfordJames Paul LankfordBill requiring companies report cyber incidents moves forward in the Senate Manchin's 'red line' on abortion splits Democrats Lankford draws second GOP primary challenger in Oklahoma MORE (R-Okla.) has proposed legislation, the Small Business Regulatory Flexibility Improvements Act, which will do just that. The legislation includes straightforward provisions that every senator should get behind if they truly care about how federal regulations impact small businesses in their state and across America.


Red tape is strangling our small businesses and undermining entrepreneurship. Indeed, according to SBE Council research, the cumulative loss of new businesses over the last decade totals 3.42 million missing businesses for America’s economy. For existing small businesses, the per-employee cost of regulation is just over $11,000, according to the National Association of Manufacturers.

Excessive regulation in the U.S. has hurt our competitiveness in the global economy. The U.S. ranks No. 51 in the world for ease of starting a business, according to the World Bank. This same report is consistent with other global studies that have found America’s friendliness and general “ease of doing business” has eroded year after year.

Fixing the regulatory system for small business is one key part of improving the ecosystem for entrepreneurship and business growth. Sen. Lankford’s bill modernizes and closes loopholes in existing law that are meant to protect small businesses from the burden of federal regulation. Unfortunately, federal agencies have found ways to work around their compliance with the Regulatory Flexibility Act (RFA) and Small Business Regulatory Enforcement and Fairness Act (SBREFA).

The Small Business Regulatory Flexibility Improvements Act provides a needed update to existing law to ensure all federal agencies, including the Internal Revenue Service, are conducting a full analysis of the potential impacts of proposed rules on small businesses. These analyses would include direct, indirect and cumulative impact on small business, as well as some basic information such as “why action by the agency is being considered.”

Simple steps, such as the “why are we doing this” exercise, will make regulators think through their justification of the new rules they are about to impose on small businesses. In addition, regulators would be required to review other existing rules that may duplicate, overlap and conflict with their proposed rule. The confusion of how a new regulation conflicts with one already on the books is an often cited challenge for small business owners.

The improvements that Sen. Lankford’s bill brings to the regulatory process would make a real difference for small businesses, entrepreneurship and economic growth in America. The general principles of the legislation align closely with President Obama’s executive order on improving regulation and regulatory review. In other words, the bill’s provisions are non-controversial and non-partisan. But opponents to change are finding absurd reasons for stopping improvements to a regulatory system without bounds.

For example, they claim that making regulators do comprehensive impact analyses is too much work. In other words, the effort to document in more detail what they should be doing but sidestepping through loopholes adds to their workload. Yes, the bill does expand the requirements of the law to other agencies, but doesn’t it make sense that regulators have a consistent process for evaluating and analyzing how regulations will impact entities most impacted by their actions?

The Small Business Regulatory Flexibility Improvements Act is a positive and needed bill to boost small business growth and entrepreneurship. Our elected officials love small business in their speeches and during election season. It’s time to support small business through action, and supporting this bill is a meaningful way to actually show it.

Karen Kerrigan is president and chief executive officer of the Small Business & Entrepreneurship Council. Follow her @KarenKerrigan.

The views expressed by contributors are their own and are not the views of The Hill.