Brian's Column 10-9-14

In the past, I’ve written about small business in Illinois, and today I want to continue that topic with a look at the relationship of small business to government.  Small businesses, I’m sure you’ve heard many a politician claim, are the backbone of the economy.  And they’re absolutely right.  Our state alone “is home to approximately 397,000 small businesses and . . . three out of four Illinois employers are small businesses,” according to a Crain’s article.  Three out of four seems like a high number—but when you think about our corner of Northwest Illinois, the majority of businesses are small businesses—from Union Dairy just down the street from where I write this to Blaum Bros. Distilling Co. in Galena to NITE Equipment in Winnebago County.

So, if small business makes up so much of our economy, what exactly are we as a state and as a country doing to help it?


As it turns out, not much, actually.
Currently, 800 to 900 federal rules affect small businesses—and that doesn’t even include the state rules.  Every new rule is sort of a hidden tax: it represents a new cost that businesses have to pay, either with their money or with their time.  Larger businesses are able to better absorb costs that come with new rules, but, according to an article in a Kansas newspaper, The Wichita Eagle, “the Department of Labor reports that firms with fewer than 20 employees spend 38 percent more per employee to comply with government regulations than firms with 500 or more employees.”  In dollars and cents, that’s on average “$10,585 for businesses with fewer than 20 employees but only $7,755 for businesses with more than 499 workers,” says an article in Small Business Trends.

In addition to the hidden tax of new rules, government regulation creates uncertainty for businesses both large and small.  But because small businesses have limited funds, they are more likely to avoid investing in new ventures and more likely to avoid hiring new employees, according to the same article in Small Business Trends.

So what does that mean for small businesses in Illinois?  Well, for one, our business regulations are pushing businesses out to more business-friendly states.  Take, for instance, the example from The Illinois Policy Institute of Sara Travis, an entrepreneur from Chicago who began a mobile coffee-vending business called The Brew Hub.  After waiting for over a year for a business permit from Chicago and constantly having to worry that she would be fined or harassed for selling coffee, she chose to pick up her business and move it to Austin.  Instead of the more-than-a-year-wait she endured in Chicago, she filled out paperwork, paid for a permit, and received it all in one day.
And, two, regulation costs businesses money and time and can cause some to go under.  Another example—new rules on unpasteurized milk are in the works.  Those rules could and likely will “force small producers out of business or underground by requiring them to invest in the same kind of expensive equipment and processing required of large commercial dairies,” according to an article in The State Journal Register.

So what’s a state to do?

Well, there are a few things that can be done.  First, startup fees need to be lowered.  To start an LLC, you need $500 (as opposed to the $150 needed to start a corporation).  Lowering those fees would give entrepreneurs a bit more money to finance their businesses instead of throwing it into the gaping maw of Springfield.

Second, while some regulations are necessary, most aren’t.  Many regulations are one-size-fits-all band-aids meant to remedy one instance of bad business, and while the regulation may fix the one instance, it ends up doing a whole lot of harm to good small businesses.  Instead of slapping band-aids on all small businesses, maybe it’s time to listen to small business men and women about what helps and what hurts. (Incidentally, Governor Quinn created a position in his administration last January for a small business advocate. As of September, though, that position still wasn’t filled.)

And lastly, what can we in the 89th District do?

First, we can ensure sure that our cities, villages and counties are business friendly, that we’re doing everything we can to retain the businesses we have, and that we continue to create an environment to attract new businesses. And second, we can all work to ensure that our school districts are producing well-educated students who are prepared to enter the workforce.

For a full “legislative agenda for entrepreneurs,” read The Illinois Policy Institute’s article by that name at http://www.illinoispolicy.org/a-legislative-agenda-for-entrepreneurs/.

You know me—I love a good Milton Friedman quote, and here’s one that fits the occasion perfectly: “One of the great mistakes is to judge policies and programs by their intentions rather than their results.”  I’m sure those 800 or 900 federal rules in addition to state rules were created with the best intentions, but the results aren’t pretty.  Let’s rethink this regulation thing and figure out how to free up small businesses to use their limited resources to grow their businesses instead of to comply with government regulation.

As always, you can reach me or Sally at 815/232-0774 or email us at repstewart@gmail.com. You can also visit my website at www.repbrianstewart.com or follow me on Facebook, Twitter, and Google Plus.

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