Regulations worth $1.75 trillion tax?

At a debate Monday night in Lewiston, Republican Senate candidate Charlie Summers cited a 2010 Small Business Administration study that found that the nation’s regulatory burden amounted to a $1.75 trillion tax.

The study — which was funded by the Small Business Administration’s advocacy office —  concluded that small businesses shoulder the bulk of the costs of regulation.

“As of 2008, small businesses face an annual regulatory cost of $10,585 per employee, which is 36 percent higher than the regulatory cost facing large firms (defined as firms with 500 or more employees),” conclude the study’s authors, Nicole and Mark Crain of Lafayette College in Easton, Penn.

While often cited, the SBA-funded analysis has been a topic of controversy since its September 2010 release. Two left-leaning groups, the Center for Progressive Reform and the Economic Policy Institute, have released analyses that call the methodology used in the study flawed, and the Center for Progressive Reform called on the SBA to withdraw and disavow the study.

Both groups (Center for Progressive Reform report, Economic Policy Institute analysis) say the Crains’ study uses flawed data and is too reliant on data from public opinion surveys. The Center for Progressive Reform pointed out that a 2009 report from the White House’s Office of Management Budget found regulatory costs during the Clinton and Bush administrations amounted to $62 billion to $73 billion and benefited the economy to the tune of $153 billion to $806 billion. The SBA study doesn’t calculate the economic benefit of regulations.

The Congressional Research Service, Congress’ non-partisan research arm, addressed and raised questions about some of the methodological discrepancies between the Office of Management and Budget and the SBA study in a 2011 publication.

The SBA has not withdrawn the Crains’ study.