Does regulation hurt small business?

October 5, 2012 at 10:49 am 5 comments

It’s something we hear all the time: too much regulation will be the death of small businesses. But is it true? What do small businesses actually think about government regulation and what are the challenges that they face? This has been tackled by a number of different researchers and economists, and the answer is that, for the vast majority of very small businesses, regulation is not the most pressing concern.

The Main Street Alliance reports that in a survey of small businesses earlier this year, the  top concern was was weak demand. This makes sense. With unemployment remaining high, and many families continuing to face financial instability, consumer spending has gone down. The next concern cited by these businesses was the cost of health coverage and other benefits, and then followed by regulation. Even still, the survey found that 86 percent of businesses surveyed believed that some degree of regulation was necessary, and 93 percent said they could live with regulations if they were fair and manageable.

McClatchy also surveyed a random sample of of small businesses last year, and found the same sentiment. None of the businesses mentioned regulations– weak demand was the primary challenge facing small businesses. These businesses, many of them mom and pop operations, said that a lack of customers was their biggest concern.

On the hot-button issue of taxes, the Center on Budget and Policy Priorities (CBPP) published an analysis of the impact of ending the Bush-era tax cuts for high-income earners on small businesses. Despite claims that letting these tax cuts expire would be a detrimental blow to small  businesses, CBPP found that only a sliver of small  business would be affected. Only 2.5 percent of small businesses are within the top two tax rates. Extending these tax cuts would overwhelmingly benefit the wealthiest Americans– 82 percent of the value of the tax cuts would go to tax filers that make over $ 1 million. Only 0.5 percent of small business owners, and only 3.3 percent of filers making anyincome from small business, make over $1 million.

CBPP also shows that job creation and economic growth were actually stronger when we had higher tax rates. From 1993-2001– after taxincreases in 1993– small business job growth was 2.3 percent, compared to just 1 percent between 2001 and 2007.

These analyses show that the blanket statement that regulations hurt small businesses are just not true. At best, these claims are misleading. An efficient regulatory environment that levels the playing field for small businesses is necessary for economic growth.  The needs and perspectives of small businesses are being conflated with bigger business interests to push a  particular agenda that, in the end, will benefit a handful of wealthy people at the cost of many.


Entry filed under: Economic Development, Economy, Jobs & Employment, Small Business. Tags: , , .

Debate highlights an important question: What is a ‘small business’? New report shows that state tax incentives can be more effective at creating jobs


  • 1. Do small businesses create jobs? « thesupportcenter  |  October 9, 2012 at 10:11 am

    […] of “useless” regulations and stop the government from “meddling.” We also blogged about  this, and as it turns out regulation is not what small businesses are concerned with. They’re […]

  • […] small businesses are most concerned about regulations– are not necessarily true (we’ve blogged about this before). The article relies on information provided by the National Federation of Independent Businesses […]

  • […] month we took a look at whether or not regulations hurt small businesses. The answer is that for a vast majority of small businesses, regulations– including […]

  • […] Surveys of these very small businesses find that their top concern is weak consumer demand, and that regulation was not among the top concerns.  What small businesses need is a level playing field, certainty about regulations and fiscal policy, and policies and programs that support a growing middle class– people who can afford to buy their products and services.  The findings of the JCA survey represent the concerns of a very specific kind of small business– one that may employ a small number of workers, but is in no way “small” when it comes to profits. The JCA says that what we need is for government to get out of the way of the free market. What we actually need are fair and efficient policies that provide access to economic opportunity for all businesses, big and small, and that help our citizens thrive. This is what will lead us toward recovery. […]

  • 5. Small business optimism up for 2013 « thesupportcenter  |  January 25, 2013 at 1:44 pm

    […] findings corroborate previous small  business surveys that we have reported on. Although there are a variety of issues that affect business owners, […]


TSC Twitter

Error: Twitter did not respond. Please wait a few minutes and refresh this page.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 36 other followers

%d bloggers like this: