Why is there a decline in business startups? Senate Dems say this is to blame

Why is there a decline in business startups? Senate Dems say this is to blame
Image: Claudio Divizia/Shutterstock

In May, the Bureau of Labor Statistics reported that a record 94,708,000 Americans were not in the labor force in May — 664,000 more than in April — and that the labor force participation rate had dropped two-tenths of a point to 62.6 percent, near its 38-year low. The bureau also noted a concomitant decline in the startup of new businesses.

On Wednesday, Senate Democrats went in search of an explanation. They invited a handful of business experts to testify.

The Senate Committee on Small Business and Entrepreneurship convened the hearing to figure out what government should do to promote startup growth. The business experts pointed to issues like high regulatory and tax burdens for why there is a decline in startups.

But that wasn’t the answers Dem were looking for. Democratic Sen. Jeanne Shaheen sparked a conversation on diversity when she asserted woman entrepreneurs face tougher obstacles.

Sheehan noted woman are less likely to get loans and investments when trying to start a business. Her solution is making sure federal grants are being more fairly distributed to female entrepreneurs. She also noted the government can do more to help fund immigrant business owners. Republican Sen. Tim Scott said funds could also be diverted to help underfunded communities.

“I firmly believe this country has enough capital,” Economic Innovation Group Founder John Lettieri stated. “Some portion of that should be targeted towards economic development.”

Lettieri did also add that complex and overabundant tax and regulatory policies have been a huge problem for business startups. He noted that such policies tend to hurt startups more than rein in big corporations. Businesses have faced regulations and high taxes for decades, but in recent years the burden has increased significantly.

“Complexity harms new entry into the market then it does incompetents,” Lettieri warned. “One way we can address this is by looking at regulatory and tax burdens.”

Businesses are required to pay a variety of different types of taxes based on their size, among other factors. The federal government requires employment taxes and taxes on what a company sells and buys. Companies also face local and state taxes that further drive up prices. Regulations impose another burden by driving up operational and compliance costs.

This report, by Connor D. Wolf, was cross-posted by arrangement with the Daily Caller News Foundation.

LU Staff

LU Staff

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