From the October 2004 issue of Entrepreneur

For many entrepreneurs, the heavy burden of federal regulation has become a significant factor limiting their growth. In fact, the SBA's Office of Advocacy has estimated that, for small companies with fewer than 20 employees, regulatory burdens cost nearly $7,000 per employee, per year.

Just because federal regulation may be a problem, however, doesn't mean everyone agrees on the solution. Rep. Nydia Velázquez and Rep. Rick Renzi, Entrepreneur's Point/Counterpoint team, see different answers to handling regulation. Rep. Velázquez, a Democrat representing New York's 12th District, is the ranking minority member on the House Small Business Committee; Rep. Renzi, a Republican representing Arizona's 1st District, founded three small businesses before entering Congress and takes a strong interest in entrepreneurs' issues. The two don't agree on much politically, but they do share one characteristic: They both care about small businesses, and don't back away from hot topics.

What could be done in the short term in the next Congress, which opens in 2005, to deal with some of the regulatory burdens?

Rep. Velázquez: Republicans always say their top priority will be to reduce regulation for small businesses. In the next [congressional] session, the IRS, which accounts for 80 percent of the total paperwork burden, needs to have its paperwork brought under control by specifically [tailoring] paperwork to small businesses or larger companies. Why can't we get Republicans to push for simple solutions like this to help small businesses?

Rep. Renzi: We do need major reform of the IRS. The [House] Government Reform Committee is looking at simplifying the IRS and coming up with a new standard of IRS paperwork. It would force the IRS to work with the Office of Management and Budget and submit regular reports about reducing paperwork. The tax code now has more words than the Bible. We need simple deductions for expenses each year, one basic deduction for expenses and for capital outlays each year.

Leaving aside shorter-term measures, what could be done in the long term to help entrepreneurs with regulation?

Renzi: U.S. companies-especially manufacturers-competing overseas have to be as competitive as foreign companies operating here. There needs to be as little regulation on U.S. companies as there is on foreign companies.

Velázquez: We should launch a study to look at regulatory duplication among federal agencies. But instead, in Congress, we're just naming post offices across the country, not focusing on real issues.

What government agencies or committees do you think have worked together best with small businesses in dealing with regulation?

Velázquez: The EPA and OSHA have been best at helping small businesses understand their regulations: They communicate and listen to small businesses, and they become more sensitive to the needs of small businesses.

Renzi: The private sector can work very well with small businesses. The financial services industry is really reaching out to small businesses with creative loans and interest rates. Lenders are taking more risk on small businesses because they see there's a great amount of return. And Congress' Financial Services Committee has done a great job helping [push legislation that encourages the financial industry to lend to smaller companies].

Obviously, this has been an election year, which tends to slow down policymaking. Do you think some of these things will get passed in 2005?

Renzi: Once the political season is over, we can really go with an absolute tenacity and tackle the IRS. The IRS is such an enormous monster that it'll take Republicans and Democrats united to deal with it.

Velázquez: I always like to be optimistic. But there will be many things on our plate.


Joshua Kurlantzick is a writer in Washington, DC.