Cost of Regulations on Small Businesses

The annual cost of federal regulations on small businesses, including dental offices, is staggering. According to a 2010 report by the Small Business Association, “The Impact of Regulatory Costs on Small Firms,” the cost of federal regulations in the United States increased to more than $1.75 trillion in 2008. Small businesses, defined as firms employing fewer than 20 employees, bear the largest burden of federal regulations. As of 2008, small businesses face an annual regulatory cost of $10,585 per employee, which is 36 percent higher than the regulatory cost facing large firms (defined as firms with 500 or more employees).

While regulations are needed to protect the public and provide structure to state and federal laws, it often appears to be done at the expense of small businesses. This report does not consider the benefits of federal regulations, but looks at the overall costs imposed by them. Additionally, unlike most fiscal actions taken by government, the costs of regulatory actions are relatively hidden. A comprehensive list of regulatory influences that affect one’s daily existence is indeed extensive and overwhelming to track. Yet, knowledge of the cumulative consequences of regulatory actions and how these are changing, provides important information to assess and evaluate the performance of a political-economic social system.

The Small Business Association report seeks to fill some of these gaps in our knowledge by providing estimates of the costs of federal government regulations in the United States. An awareness of regulatory costs reveals much about the balance in public versus private sector responsibilities for and control over resources.