GOVERNMENT AND REGULATORY REFORM



Government and regulatory reforms that affect small business:

Over zealous regulation is a perennial cause of concern for small business owners and is particularly burdensome when the nation’s economy teeters on the brink of disaster. Unfortunately, the regulatory burden on small business continues to grow. Congress must step in and curtail costly regulations, particularly those of such anti-small business arms of government as the Environmental Protection Agency (EPA) and the Department of Labor which fail to fairly and effectively weigh the costs and benefits of excessive regulations to the American public.

NFIB members cited “Unreasonable Government Regulations” as the 6th most troublesome problem. Twenty percent named it as a critical issue.

Federal regulations cost small businesses $10,585 per employee, and they cost large companies $7,755 per employee. The cost is 36% more per employee for the small business sector.

In FY2010, federal agencies unleashed 43 major new rules. The cost of implementing these rules, as estimated by the agencies themselves, was $28 billion—the highest level since 1981.

Credit Cards And Small Businesses

Credit cards play an integral role in much of small business financial activity. About seven out of eight small business employers have one or more credit cards that they use for business purposes, and half accept them as a form of payment. Cards pay approximately one of every six dollars of sales small businesses make demonstrating their importance to the operation of smaller firms and individual businesses.

Conflicts between small business and the credit card industry are nothing new. Small business owners are also credit card users. Seventy-four percent have a business credit card and 39 percent have a personal card they use for business purposes. As consumers they often have experienced abusive practices by the industry such as:

• not receiving credit for on time payments,
  
  
  
• interest rate changes on previously incurred debt, and
  
  
  
• short notice of payment due dates.
  

These complaints led to our support of the Credit Cardholder’s Bill of Rights Act of 2009.

Small businesses share an uneasy but mutually beneficial relationship with card companies. Credit cards improve small business cash flow by:

• increasing the number of transactions,
  
  
  
• providing more efficient and speedy payment, and
  
  
  
• reduced accounting demands.
  

According to a report published by the nonpartisan Government Accountability Office the business owners’ benefits of accepting cards also include increased sales and reduced labor costs. Some business owners, however, reported that increased payment costs were not made up by any increase in sales.

These same merchants stated their inability to refuse specific cards and other network rules limited their ability to negotiate payment costs with card companies. Small businesses tend to shop around for different cards frequently indicating that they are not always happy with their existing arrangement.

Our credit research pinpoints two steps that could be taken to improve this relationship: payment minimums and debit at par in regard to checks.

Additionally, card companies require that business owners who accept cards also accept them for all purchases regardless of how small the transaction. The practical result is that those who accept cards will likely lose money on very small transactions.

Debit cards and checks are often confused as being identical methods of payment often referred to as ‘debit at par.' Accepting a debit card as payment costs the merchant more than it would to process a paper check. It's especially true that business owners lose money on smaller sales paid for by debit card due to the transaction fees. For a typical $100 purchase the business owner pays up to 43 times more in processing costs for a debit card transaction than it would for a paper check. We support a common sense reform that would align the cost of processing debit cards with paper checks.

As noted, small businesses report that they often lose money on small transactions since profit margins are so low and any profits may be eaten up by their credit card fees which are typically higher for smaller businesses than larger ones. Credit card companies prohibit businesses from setting minimum transaction amounts such as a $5 or $10 minimum for purchases, and businesses found to be in violation could be subject to punitive fines of up to $5,000 per day. We support allowing businesses the opportunity to set minimum transaction levels for credit and debit card use.

Cap and Trade

How does a cap and trade system work?

Cap and trade is a government created market for greenhouse gas (GHG) emissions credits. In some cases, there is a cost associated with each credit. First, the federal government sets a total limit on the amount of GHGs that entities (businesses) are allowed to emit (the ‘cap’). The cap on emissions falls over time meaning fewer and fewer emissions are permitted in the following years.

Where We Stand: Cap and Trade

NFIB Opposes H.R. 2454,The American Clean Energy and Security Act of 2009

Key Reasons:

A cap and trade system is just a way for the federal government to raise taxes to pay for new government run programs that could be totally unrelated to the environment. Tax dollars generated from this system will be given to politically connected corporations and special interest groups to fund efforts to impose green mandates on small businesses.

Utility companies will pass the cost of this system along to consumers and small businesses in the form of higher prices for energy and manufacturing of goods. The tax will affect all businesses, even those that do not emit a large quantity of greenhouse gases.

Massive job loss is inevitable under a cap and trade system. That’s why a “Climate Change Worker Adjustment Assistance” program was included in H.R. 2454. It will provide support
for every person who loses their job because of this legislation including:

• three years of unemployment pay,
  
  
  
• 80 percent of health insurance premiums,
  
  
  
• $1,500 to look for a new job, and
  
  
  
• another $1,500 to relocate to a new job,
  
  
  
• and additional employment services like skills assessment and job counseling.
  

The bill provides no support for those forced to close their small business.

Supporting Data:

The projected costs of the government’s cap and trade program are overwhelming. According to the non-partisan Congressional Budget Office (CBO) and the Joint Committee on Taxation, the proposal costs about $821 billion and raises $846 billion over the next 10 years leaving the federal government $25 billion in taxpayer dollars to waste.

Independent analysis estimates that job loss could be almost 1 million jobs each year.

The average yearly increase in energy costs would be $1,100 for a family of four. Because small businesses consume far more energy than the average family their costs can be expected to be significantly higher.

Legislative Update:

The House passed H.R. 2554 by a vote of 219-212. The legislation would require certain entities to participate in a government run cap and trade program. We strongly opposed and key voted against the legislation because it would increase energy costs on all consumers, especially small businesses.

The bill awaits action in the Senate.

EPA Moves Forward with Job Killing Ozone Standards

Since Congress appears unlikely to finalize cap and trade legislation anytime soon the Obama administration is working through the Environmental Protection Agency (EPA) to push job killing environmental regulations. Earlier this year, the EPA proposed tightening national air quality standards. As many as 675 counties across the U.S. would violate the proposed standard triggering job killing mandates, costly compliance fees and financial penalties for businesses in those areas.

The economic impact of this rule would be far reaching and essentially create a national energy tax. According to a Manufacturers Alliance study done in collaboration with the National Association of Manufacturers, the proposed ozone standard would lead to a total of $1 trillion in annual compliance costs and 7.3 million jobs lost.

National Small Business Surveys Indicate Opposition to Cap and Trade

NFIB released two national surveys indicating that the views of small businesses and the general public are aligned in their opposition to a cap and trade system. The surveys were conducted in the past month, and asked respondents about their views on the issues surrounding the cap and trade debate.

"Small business owners and the public both agree that a cap and trade system would have a negative impact on jobs, energy costs and economic growth," said Dan Danner, president and CEO of NFIB.

Respondents overwhelmingly listed the economy and jobs as the most important issues, with 71% of business owners and 57% of the public thinking that a cap and trade policy will increase the cost of energy.

Environmental Protection Agency (EPA)

Small business owners are rightly concerned about broad effect the Environmental Protection Agency’s regulations are having on their bottom lines. From farms to construction companies the EPA’s reach is extending further into the operations of small business owners. In fact, a 2010 Small Business Administration study found that small businesses spend an average of 364 percent more per employee annually than larger firms. At a time when America is hoping for strong job growth to get our economy rolling again, the EPA needs to avoid saddling small business owners with overly burdensome regulations.

Current Regulations on EPA’s Agenda

Cap and Trade by Regulation: The Obama Administration was unable to get a greenhouse gas cap-and-trade bill through the last Congress. However, they are now attempting to bypass Congress in order to implement regulations under the Clean Air Act. Using a court order granting the EPA authority to regulate emissions from motor vehicles the EPA quickly issued rules expanding that authority to cover stationary sources like small businesses.

NFIB and the NFIB Small Business Legal Center are an integral part of an industry coalition aggressively challenging these economically devastating regulatory maneuvers in court.
Such regulations will substantially increase the cost of energy for all consumers, especially small businesses.

Farm dust: EPA is expected to soon issue a new proposal that would double the standard for permissible dust levels on farms (and other workplaces). If the EPA is successful in setting this impractical standard for regulating dust at lower levels the consequences could be devastating to our economy as an untold number of family farms will be forced to shut down. NFIB firmly supports the current, adequate standard and believes it should be left alone.

Lead dust at constructions sites: As a follow up to an excessively expensive rule covering renovations in homes that went into effect last year, the EPA is now exploring a version of the rule that would cover external lead dust that may be disturbed during renovations to public and commercial buildings. This proposal would greatly expand the number of small businesses affected and would extend the rule’s reach beyond construction firms by creating the potential for building owners and renters to be held liable for lead exposure as well.

EPA is expected to publish a formal regulatory proposal by June 2012.