The Regulatory Flexibility Act (RFA) requires agencies creating a new rule or regulation to determine if that regulation will have an economic impact on small businesses, and if so, what that impact will be, what the alternatives are, and why it is justified. Additionally, the RFA allows small businesses a say in agency rulemaking by requiring agencies to notify the Small Business Administration’s Chief Counsel for Advocacy when the process begins, allowing them to comment on the rule. 

Despite the good intentions of the RFA — which was last amended in 2010 — to protect small businesses from burdensome and unnecessary regulations, small businesses continue to pay higher and higher costs due to rules coming from the administrative state: in 2014, small businesses spent about five times as much per employee as medium-sized businesses to comply with federal regulation, while today, small businesses pay seven times as much per employee as medium-sized businesses to comply.

Unfortunately, many times, agencies ignore the RFA and disregard the impact their regulations will have on small businesses. The NFIB found that the SBA concluded federal agencies turned a blind eye to costs of regulations on small businesses or underestimated their economic impact in 75 percent of rulemakings. 

Additionally, under the Biden-Harris Administration, federal agencies significantly increased the number of regulations impacting small businesses. In 2022, around half of the regulations imposed by the administrative state that affect small businesses required a regulatory flexibility analysis, and the other half still impacted small businesses but were below the threshold for a regulatory flexibility analysis. 

Burdensome regulations and red-tape make it harder and more costly to start a business and achieve the American dream, and the harder it is to comply with federal regulations to start a new business, the fewer people will take on the task to see their ideas through. We must make sure the administrative state doesn’t harm American innovation, entrepreneurship, and competition.

Rep. Brad Finstad’s legislation, H.R. 7198, the Prove It Act of 2024, requires greater transparency from agencies on regulatory decisions that affect small businesses and empowers small businesses to petition the SBA to review proposed regulations and their economic impact by amending the Regulatory Flexibility Act, strengthening American innovation and putting small businesses before burdensome regulations.

House Republicans will always stand up for small businesses against federal bureaucrats.