The regulation bill a ten-person company pays that a giant can shrug off

A form does not know how big your company is. That is the whole column, in one sentence, and the rest is arithmetic and evidence. A rule that requires a written plan, a quarterly filing, a certified record or a trained compliance officer demands the same thing from a bakery with ten employees as from a corporation with ten thousand. The corporation has a legal department. The bakery has the owner, who is also the baker, the bookkeeper and the person who unclogs the sink.

Washington talks about regulation in the language of the aggregate: a rule costs the economy so many billions. That language hides who pays. The bill is not divided evenly. It lands per firm, and a firm that is small has fewer workers, fewer customers and fewer dollars of revenue across which to spread it. So let me make the case in the structured way it deserves: define the terms, state the claim, put numbers on it and then answer the best objection.

Terms

A regulation is a rule issued by an executive agency under authority delegated by Congress, with the force of law. A final rule is the finished version, published in the Federal Register after the agency has proposed it and taken public comment. A compliance cost is what a firm spends to follow a rule: the staff time to read it, the systems to track it, the filings, the lawyers, the consultants, the equipment and the training. A fixed cost is one that does not change with the size of the firm. A small business, for most federal purposes, is defined by the Small Business Administration by industry, using either a limit on annual receipts or a limit on the number of employees.

The thesis follows from the definition of a fixed cost. If part of a compliance burden is fixed, then divided by the number of employees it is larger for the small firm. That is not an ideological claim. It is division.

What the Federal Register shows

Start with the volume of rules. The Federal Register published 2,441 final rules in 2025, and 3,248 in 2024. Those are the counts of documents of the rule type for the two years in the Federal Register's own database, and a few of them are corrections to earlier rules.

Do the arithmetic. 3,248 final rules across 366 days in 2024, a leap year, is about 8.9 per calendar day. 2,441 in 365 days in 2025 is about 6.7 per day. The difference between the two years is 3,248 minus 2,441, which is 807 fewer rules, a drop of 807 divided by 3,248, about 24.8 percent, or roughly a quarter.

Two cautions are in order. A count of rules is not a count of burdens: many final rules are routine, such as the annual adjustment of a fee, a safety zone around a regatta or a change to an airworthiness directive, and a handful are enormous. The second caution is that the count is not the stock. Rules, once adopted, accumulate in the Code of Federal Regulations and stay there, so the burden a firm faces is the pile of everything still in force, not just the year's new additions. You can explore how that pile looks from the citizen's side at the red tape page.

What the Small Business Administration's studies found

The Small Business Administration has an independent unit called the Office of Advocacy, created by Congress in 1976, whose job is to represent small business before the federal government. Over the years it has published and commissioned research on the cost of federal regulation by size of firm. The best-known of these studies were done by the economists Mark and Nicole Crain, in several editions that you can find on the Office of Advocacy's website.

The studies made a simple finding, as I read the reports: the cost of federal regulation per employee is higher for small firms than for large ones, and the smallest firms bear the highest per-employee cost. Check the reports themselves for the breakdown by category and the size cutoffs, since I will not state them from memory.

I will not quote a dollar figure from those studies, because the numbers differ from edition to edition, the methods have been debated and I do not want to hand you a figure I cannot confirm to the dollar. The conclusion is what matters, and it is not in serious dispute: the per-employee burden falls as firms get bigger. If you want the numbers, the Office of Advocacy's website carries the reports, and the method sections are worth reading. A careful reader should also read the critics, who argue that such studies rely on shaky estimation of costs. The direction of the finding, however, matches what common sense and arithmetic say.

The arithmetic of a fixed compliance cost

Let me show the mechanism with a hypothetical, labeled as such. Suppose a new rule requires every employer in an industry to maintain a documented safety and reporting program, which takes a part-time compliance specialist, outside software and an annual outside review. Say the total cost is sixty thousand dollars a year. It is the same sixty thousand for every firm, because the rule asks for the same program from each.

The cost per employee is the fixed cost divided by headcount: 60,000 divided by 10 is 6,000, divided by 100 is 600, divided by 1,000 is 60, and divided by 10,000 is 6. The same rule costs the small shop a thousand times more per worker than it costs the giant. And in dollars per worker the difference is what shows up in the budget: six thousand dollars is a very large number against the typical pay of a worker in a small firm, and six dollars is a rounding error against the pay of a worker in a big one.

Now suppose the average worker at each firm generates a similar amount of revenue, say a hundred thousand dollars a year. For the small shop, the rule takes six percent of revenue per worker, which can be the whole margin. For the corporation, six dollars on a hundred thousand is six thousandths of one percent. One of them can absorb the rule. The other has to raise prices, cut hours, delay a hire or close.

Real life is messier than the example, since some compliance costs scale with size and a big firm faces more rules because it has more activities. But the fixed component is real, it is in nearly every rule, and it is what makes regulation a kind of regressive tax on smallness.

The steelman: rules protect people, and small firms are not exempt from harm

The best case against my thesis runs as follows, in words its defenders would accept.

Regulations exist for reasons. A restaurant with ten employees can poison a customer as easily as a chain with ten thousand. A small manufacturer can injure a worker, pollute a stream or cheat a customer. The harm is not smaller because the firm is smaller, and the victim does not care about the size of the company. Exempting small firms would leave the most vulnerable workers and customers with the least protection. Besides, the large firms are subject to more scrutiny and carry more total cost. And small business owners themselves often support sensible rules, because they protect honest firms from dishonest competitors.

That is a serious argument, and I accept its premise. Some rules protect against real harms and deserve to be applied to everyone. The answer is not that small firms should be free of all rules. It is that the design of the rule should recognize the difference.

The rebuttal, in numbered points

1. The issue is design, not whether to protect people. A rule can protect health and safety and still be built to scale: a simpler form for a small firm, a longer phase-in, an exemption below a threshold for rules whose risk scales with size, or a performance standard in place of a prescribed program.

1. Compliance is a barrier to entry. A cost that weighs more heavily on the entrant than on the incumbent protects the incumbent. That is why big companies love the regulations their small rivals cannot afford and Big Companies Can Afford Regulation, Which Is Why Some of Them Ask for More find some of the loudest calls for new rules among the biggest firms.

1. The costs are hidden from the people who vote on them. A rule that costs the taxpayer nothing on a federal budget line can cost the economy billions, and the agency that writes it is not required to count the damage to the firm that never opens. A regulatory budget would change that, as A Regulatory Budget Would Make Washington Count the Cost of Its Rules argues.

1. Small firms are where the growth is. New and small firms are a major source of new jobs, and a firm that never starts creates none.

1. A fixed cost is a tax on smallness. The arithmetic above holds regardless of the rule's purpose. If we want a country with many small firms, we have to count what each new rule costs the smallest.

The Regulatory Flexibility Act of 1980

Congress saw part of this problem more than forty years ago. The Regulatory Flexibility Act, signed by President Carter in September 1980, requires federal agencies, when they propose a rule, to analyze its impact on small entities, if the rule is likely to have a significant economic impact on a substantial number of them. The agency must consider alternatives that would minimize the burden, such as differing requirements for small firms, simplified reporting and exemptions, and must publish its analysis. An agency may avoid the analysis by certifying that the rule will not have such an impact.

That escape hatch is the weak point. Critics, including the Office of Advocacy itself, have long said that agencies too often certify away their obligations, and that the analyses they do perform are thin. The Act was strengthened in 1996 by the Small Business Regulatory Enforcement Fairness Act, which made agency compliance subject to judicial review and, for certain agencies, required panels that bring in small business representatives before a rule is proposed. The law is sound in principle, and the enforcement is uneven. Anyone who thinks the problem was solved in 1980 should read the Office of Advocacy's annual reports on how agencies have complied.

The Founding angle

The Constitution gives the power to make laws to Congress: "All legislative Powers herein granted shall be vested in a Congress of the United States," says Article I, Section 1. A final rule is not a law passed by Congress. It is a rule written by an agency, under a statute written broadly enough to let the agency fill in the details. When a Congress hands over the details, it also hands over the question of who pays, and a body of unelected officials decides, thousands of times a year, what a ten-person firm must do. That is a lot of law for a place where nobody is answerable at the ballot box. The Court's decisions limiting agency overreach, including West Virginia v. EPA (2022) and Loper Bright Enterprises v. Raimondo (2024), which overruled Chevron, are a step back toward the Article I principle, as Chevron Began as a Win for Reagan's EPA, Which Makes Its Fall So Ironic explains. You can follow the current state of the rules at the red tape page and the oversight record at the oversight page.

A related point, from the world of taxes, appears in tax complexity is a subsidy for lobbyists, and the code shows how it works: complexity is expensive for the many and affordable for the few.

What would help

The reforms are neither exotic nor partisan, and several have been proposed by both parties.

• Require every agency to publish, for every major rule, the cost per employee at small, medium and large firms.
• Tighten the certification loophole in the Regulatory Flexibility Act, and let courts review certifications.
• Phase in new requirements by firm size, with the smallest firms last.
• Add sunset dates, so rules expire unless reviewed.
• Adopt a regulatory budget, so that adding a new rule requires retiring an old one.
• Let small firms use a single, plain-language compliance form for each rule.

The case in brief

1. A compliance cost is partly fixed, so the same rule costs far more per employee at a small firm than at a large one: a $60,000 program is $6,000 per worker at ten employees and $6 per worker at ten thousand.
2. The Federal Register published 3,248 final rules in 2024 and 2,441 in 2025, a drop of 807, or about a quarter, and the pile of rules in force grows with every year.
3. The Small Business Administration's Office of Advocacy studies found that per-employee regulatory costs are higher for the smallest firms.
4. The Regulatory Flexibility Act of 1980 requires agencies to consider small firms, but agencies can certify their way out, and enforcement is uneven.
5. The remedy is to design rules that scale, count their costs and keep Congress, not agencies, responsible for the law.

What you can do: visit the red tape page and pick one rule that affects a business in your town, then ask your representative whether the agency completed a small-business analysis for it.