OPINION:
Last April, President Biden remarked that small businesses are “the backbone of our economy and the glue of our communities.” He acknowledged that “there is more [his administration] can do” to help small businesses, including “investing in America’s small businesses” by “opening up doors of opportunity” for the “doers, dreamers and job creators” that run small businesses.
Small businesses couldn’t agree more with Mr. Biden on their importance to the economy and the urgent need for help.
The Biden administration can start by looking in the mirror. The regulatory policies of the last three years have imposed unprecedented red tape and paperwork burdens. According to one analysis, the regulatory burden imposed by this administration alone exceeds $450 billion and 279 million hours of paperwork. And if the administration’s 2023 proposed rules become final, they will add a further $615 billion and 190 million paperwork hours.
Let’s be clear. Imposing more regulatory costs and paperwork burdens does not open “doors of opportunity” for small businesses. This aggressive regulatory agenda is a wet blanket for small businesses that don’t have compliance officers or lawyers to navigate red tape.
One recent example is the U.S. Treasury’s Financial Crimes Enforcement Network’s beneficial ownership reporting requirements that took effect Jan. 1. Under these new requirements, our country’s smallest businesses — those with 20 employees or less and $5 million or less in annual revenue — are now required to report and periodically update personally identifiable information of company owners and senior employees to the network. Estimates show that this new rule will affect 32.6 million small businesses in 2024 and 5 million to 6 million businesses every year after.
According to a recent survey from the National Federation of Independent Business, 83% of small businesses are unfamiliar with this new rule. Yet businesses that do not comply face up to a $10,000 civil penalty or two years in jail. Reducing illicit behavior and financial crimes is certainly a laudable goal, but subjecting tens of millions of law-abiding small businesses to an onerous and privacy-eliminating reporting requirement is not the way to do it.
Congress must wake up to these massive new regulatory burdens on small businesses. It can start by enforcing and strengthening laws such as the Regulatory Flexibility Act, which Congress unanimously passed in 1980. The act was meant to address the disproportionate impact of federal regulations on small businesses by requiring federal agencies to analyze the impact regulations have on small entities. As my organization has shown, however, agencies use loopholes to underreport the impact rules will have on small businesses — or ignore the law altogether.
The Biden administration must start taking its obligations under the Regulatory Flexibility Act seriously. And Congress must strengthen the law and write clear statutes to protect small businesses in the future.
Without congressional leadership, small businesses will continue to face regulatory uncertainty and increasingly rely on the courts for any semblance of regulatory relief. The Supreme Court recently heard oral arguments in cases that have the potential to limit the authority granted to federal regulators. The court cases relate to Chevron deference, a deeply flawed doctrine that allows judges to defer to an administration agency’s interpretation of a statute so long as the interpretation is “reasonable.”
Consider the Biden administration’s broad reading of the Clean Water Act and its vast claim of jurisdiction over private wetlands. The Chevron doctrine tips the scale in favor of the government and against small businesses and farms. Agencies use the doctrine to increase their power, coming up with highly questionable interpretations and claims of authority, knowing that courts will likely defer to the agency in a lawsuit. By overturning Chevron, the Supreme Court could help restore the balance of power between the Biden administration and small businesses.
While Congress and the Supreme Court can take action to ease the regulatory burden, the Biden administration must step up, too. Mr. Biden is right — there is more he can do to help small businesses. But that will require the bold realization that his administration’s unprecedented explosion of regulatory burdens is saddling small businesses with red tape, mandates and paperwork. It means addressing the unsustainable growth of executive authority and using the power of the purse to tie the hands of overregulating rogue agencies.
Small businesses are not a Republican, Democratic or independent issue. We hope that 2024 is a year of small-business growth. That, however, requires addressing the unsustainable tsunami of red tape rushing out of Washington.
• Beth Milito is executive director of the National Federation of Independent Business’ Small Business Legal Center.
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