How Local Governments are Affecting County and State Economies

More than 45% of U.S. gross domestic product is driven by the small business sector. About 98% of the country’s businesses have fewer than 100 employees. Nearly half of workers in the American private sector are employed by small enterprises. Historically, small businesses have been responsible for two-thirds of all net new jobs. It is obvious that small business undergirds the U.S. economy. However, government over-regulation of small business are a direct threat to small business and unless curbed, will destroy a substantial portion of the economic fundamentals of the country.

Each year, more than half a million new business establishments are launched, creating more than 2.5 million jobs. America is home to another 23 million non-employer businesses, which, according to the Census Bureau, run “the gamut from old-fashioned family-run corner stores to home-based bloggers.”

This problem is compounded by the estimated 90,106 state and local governments in the United States (as of 2012), each with their own varied authority to promulgate rules and regulations. Their rules and complexity continue to harm to America’s small business.

While many are familiar with the over-regulation at the federal level, I focus this article on an area in need of research and action for state and local governments. Small businesses have to deal with an ever-expanding and out of control regulations from state and local governments to start a business, apply for a business or occupational license, hire employees, pay taxes, enforce contracts, and even close a business. Local governments such as Palm Beach County, FL tax businesses to death, hire and deploy workers who believe that it is their job to be non-responsive to the needs of small businesses and exists it seems to put small business out of business. For example, a company in West Palm Beach, Florida is building a prefabricated sterile pharmacy in an existing structure. Although the City of West Palm Beach has no experience with such a building, they insist that a permit is needed. Asked what kind of permit, they replied that they did not know. So, how could you have a business put in place a permit that you will issue when you don’t know what kind of permit is required?

The company solves at considerable expense, the permit issue. They call the Fire Inspector. He responds that he does not come out to tell the business what is needed. He only comes out after the sprinklers have been installed and at that time, if he decides the fire suppression system does not meet code, the business will have to replace it at its cost.

The Small Business Administration (SBA) estimates that between 1993 and 2011, small businesses created 64 percent of all of the new jobs in the U.S. Beyond being a driver of jobs, small businesses are also a driver of productivity growth. According to the SBA, small businesses develop more patents per employee than larger businesses, and the patents small business develop tend to be more significant than large firm patents.[

Cities such as West Palm Beach, Florida don’t care about impact, they care about regulation. The problem with this approach is that the money that they are forcing the company to spend is money that can be used to employ more people and contribute to the tax base and the economy. This short-term thinking is what empty city coffers and can lead to over taxation and businesses and their employees moving out of the county. Too many local governments have taken up the over-regulation approach loved by the federal government. It has not worked at the federal level, what makes them think it will work at the local level?

These regulatory regimes create hostile business environments, which hold back economic development, job creation, and impede the social ties commerce knits within an area.

According to The Chamber of Commerce, “An aspiring business owner may face the challenge of having to deal with regulations and rules promulgated and implemented by multiple state and local governmental units, in addition to dealing with federal requirements. While each state and local regulatory climate is different, the very amount of points of contact to be navigated presents a potential stumbling point to small business establishment and growth in all areas of the country.”

We small business owners know how to run our business without over-regulation and unnecessary political interference. In fact, if we ran our business the way the local governments run their cities and counties, we would be out of business. We are not anti-regulation, we are anti-over regulation. We are not anti-safety, we are anti-political insanity. It is time that small business owners at the state and local level work with their Chambers of Commerce to provide them with data on the negative effect of unnecessary regulation at the state and local level. It is also time that state and local Chambers act deliberately and aggressively to frontally attack over-regulation, the fundamentals of the economy depends on it.