SOCMA strongly believes the economic impacts of regulations on U.S. companies of any size, but particularly small manufacturers, should be given more thorough consideration by both Congress and the White House. Our nation’s place as the world’s leader in innovative products and technology is at stake.
The vast majority of SOCMA's member companies are small businesses that bear a disproportionate share of the burden imposed by compliance requirements with federal regulations. By the special nature of their chemistry, SOCMA members must remain highly innovative to stay competitive in the global marketplace. Often, U.S. government regulations act as barriers to their ability to innovate while they compete against companies in foreign countries whose governments place much less regulatory restrictions on them. As a result, SOCMA members are at risk every day from unfairly losing ground in the marketplace due to regulatory imbalance.
Regulations are necessary and play an important role in keeping our environment clean and our workplaces safe and secure. However, over time, there has been and continues to be governmental tendency to grow regulatory burden. With regulation comes cost, and safeguards put in place to ensure new regulations do not overly burden companies do not always work or, in some cases, are not used. Rarely do they do enough to ensure that a disproportionate burden is not placed on smaller companies.
Research by the U.S. Small Business Administration in 2010 shows that small businesses continue to bear a disproportionate share of the federal regulatory burden. The findings are consistent with those in Hopkins (1995), Crain and Hopkins (2001), and Crain (2005). The research finds that the total costs of federal regulations have further increased from the level established in the 2005 study, as have the costs per employee. More specifically, the total cost of federal regulations has increased to $1.75 trillion, while the updated cost per employee for firms with fewer than 20 employees is now $10,585 (a 36 percent difference between the costs incurred by small firms when compared with their larger counterparts).
The study also found that environmental regulations appear to be the main cost drivers in determining the severity of the disproportionate impact on small firms. Compliance with environmental regulations costs 364 percent more in small firms than in large firms. The cost of tax compliance is 206 percent higher in small firms than the cost in large firms.
The disproportionality of the burden borne by small firms, identified in previous SBA studies, is further validated in this instance. On a per-employee basis, it costs about $2,830 more for small firms to comply than their larger counterparts. This straight difference translates into 36 percent.
Furthermore, this report details the distribution of regulatory costs for five major sectors of the U.S. economy: manufacturing, trade, services, health care, and other. The sector-specific findings reveal that the disproportionate cost burden on small firms is particularly stark for the manufacturing sector. Because the disproportionality of the burden is placed on small manufacturers complying with environmental, workplace, and tax regulations — all of which are all too familiar to chemical manufacturers — SOCMA remains deeply concerned by the fact that little is being done by the federal government to address this continuing challenge to innovation and, consequently, job growth.
SOCMA recommends effective implementation of the Regulatory Flexibility Act (RFA) and Small Business Regulatory Enforcement Fairness Act (SBREFA), as well as regular use of tools provided by SBREFA.
- SOCMA is engaged in discussions and projects with various groups that are addressing small business issues, including SBA's Small Business Roundtables and the EPA's Office of Small Business.
- SOCMA is also working with members and staff of the House of Representatives and Senate Small Business Committees to urge federal compliance and ensure the voice of specialty chemical manufacturers is heard in legislative and regulatory proposals.
Successful implementation and utilization of the tools provided by SBREFA will ensure SOCMA's participation with government to create responsible laws, regulation and standards to safeguard the community, workplace, and environment, and not overly burdening small business.
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