Small Firms Pay More to Meet Rules, SBA Says

The nation’s smallest firms pay disproportionately more than larger companies to comply with government regulation, according to a report released Tuesday.

With the economy faltering, legislators should consider scaling back the number of regulations small businesses are required to follow, said the study’s co-author, Thomas D. Hopkins, dean of the Rochester Institute of Technology in New York.

Using government data from last year on how much it costs businesses to comply with various regulations--ranging from pollution controls to worker compensation rules--the report found that firms employing fewer than 20 employees face an annual regulatory cost of $6,975 per employee. That’s nearly 60% higher than the per-worker cost at a firm with more than 500 employees, according to the report, which was commissioned by the Small Business Administration.

Environmental regulations and paperwork required for tax compliance are “particularly disproportionate in hitting small business,” the report said.

The reason, Hopkins said, is economies of scale. Often, pollution solutions, for example, involve the purchase of equipment, which costs the same whether a company has 20 employees or 200.

Some environmentalists wonder whether exempting small businesses would be cost-efficient.

“There’s really no reason to believe that weakening environmental regulations will boost the economy,” said Kevin Finney of the Coalition for Clean Air in West Los Angeles.