How Congress Can Reduce the Regulatory Burden on Small Business

Date: May 17, 2023

Strengthening the Regulatory Flexibility Act is crucial for small business

The Regulatory Flexibility Act (RFA), unanimously passed by Congress in 1980, was enacted to protect small businesses from one-size-fits-all rulemaking by federal agencies. Unfortunately, federal agencies routinely ignore the RFA’s requirements throughout the rulemaking process. NFIB’s Manager of Federal Government Relations Josh McLeod wrote an op-ed for the Washington Times about how Congress can give small businesses relief from costly and complicated regulations by strengthening the RFA.

“The RFA was initially successful, leading to a 16% decrease in final rules and a 28% decline in proposed rules in its first year. Yet agencies have since discovered they can treat the law as a formality. The result has been an explosion of costly mandates and red tape. For instance, between January 2021 to March 2023, the Biden administration imposed almost $360 billion in regulatory costs and added more than 220 million hours of paperwork burdens,” Josh wrote.

The RFA is supposed to protect small businesses by requiring agencies to:

  • analyze a regulation’s effects on small businesses
  • consider ways to ease compliance for small businesses, including alternatives and exemptions
  • solicit direct input from small businesses through formal panels, before finalizing rules

By disregarding the RFA’s requirements, federal agencies create rules that disproportionally affect small businesses. The Small Business Administration Office of Advocacy’s comment letters revealed 28 instances of federal agencies not complying with the RFA between January 2021 through January 2023.

“Congress should immediately strengthen the RFA in several ways,” McLeod wrote. “That includes increasing transparency in the regulatory process, enhancing requirements to ensure agencies give accurate assessments. It also means mandating greater reporting on less costly alternatives and even forcing agencies to issue separate and more affordable rules for small businesses. Finally, the Small Business Administration’s Office of Advocacy should be given a much larger role, including the power to approve RFA analyses before a regulation is finalized.”

Now is the time for members of Congress to support small businesses by working to strengthen the RFA. Take Action: Tell your lawmakers to support the Prove It Act and why the RFA is important to your small business.


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