Government needs to get out of the way of small business
The House Science, Space and Technology Committee and the House Small Business Committee recently approved legislation to accelerate technological innovation among small businesses.
HR 2763 was brought to the forefront of both committees in order to update two programs that help thousands of small businesses convert taxpayer-funded scientific research into breakthrough commercial products and processes. This legislation, however, is part of a larger agenda Congress must address to help small businesses and our economy recover from years of anemic growth.
HR 2763, introduced by Rep. Steve Knight, would improve the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs. Through these programs, nearly $3 billion in federal grants are awarded each year to about 5,000 small businesses and aspiring entrepreneurs to support technological innovation and development of new products and services.
The SBIR program was initially passed by Congress in 1982 and has grown from $45 million to more than $2.5 billion annually. The goal of the program is to conduct federal research using small businesses and to support the resulting science, technology and products’ potential for commercialization.
The STTR program requires collaboration between a small business and a nonprofit research institution to bridge the gap between fundamental science and commercialization. These programs are beneficial to federal research and technological innovation and help small businesses expand their products’ reach to government and private and nonprofit organizations.
Helping 5,000 U.S. companies put taxpayer-supported research to work is worthwhile. But there are 23 million U.S. small businesses. These enterprises employ nearly one-half of all private sector workers.
The risk-taking American entrepreneurs who built these businesses are our country’s competitive edge in the global economy. These small business owners don’t want federal grants; they need the federal government to get out of their way.
What stands in the way of 23 million small businesses? U.S. business tax rates are the highest in the developed world, a huge disadvantage for every U.S. business that faces intense competition from China, Europe and other nations. High taxes eat up profits and deprive businesses of capital that could be invested in productivity and growth — developing new products and markets and hiring more people.
Just as damaging as high rates is the overwhelming complexity of our tax system. Federal tax regulations now total 75,000 pages. Obamacare alone added about 5,000 pages of IRS regulations and guidance.
The nonpartisan National Taxpayers Union Foundation estimates the U.S. tax code is now more than two times the length of the King James Bible and the entire works of Shakespeare combined. Small business owners have no choice but to spend tens of billions of dollars each year on outside tax experts.
Federal overregulation of every aspect of operating a business hits small companies especially hard. According to the National Small Business Administration, regulatory costs for a new startup business average $83,000 per year.
A study released in 2010 by the U.S. Small Business Administration estimated total annual regulatory costs for small businesses to be $1.75 trillion. (Not surprisingly, the Obama administration buried that study.) At best, overregulation is a big drag on small business growth. At worst, inflexible federal rules force businesses to close.
For the first time in many years, the White House and Congress are working together to overhaul the tax code and relieve regulatory burdens. Rewriting the tax code is a huge job, but we hope to vote on comprehensive, pro-growth reforms by the end of this year.
Congress has already used its authority to repeal more than a dozen regulations, with more in the works. And the president has ordered federal agencies to peel back two existing regulations for every new one issued.
A decade of huge mistakes made in Washington, D.C., has slowed down America’s small businesses. It is time for the federal government to get out of the way and allow our dynamic small businesses to lead a renewal of U.S. economic growth.
Rep. Steve Knight, R-Lancaster, represents the 25th Congressional District, which includes Simi Valley. Rep. Lamar Smith, R-Texas, is chairman of the House Science, Space and Technology Committee.