[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]




 
          H.R. 5242, THE SMALL BUSINESS PAPERWORK AMNESTY ACT

=======================================================================

                                HEARING

                               before the

                   SUBCOMMITTEE ON REGULATORY AFFAIRS

                                 of the

                              COMMITTEE ON
                           GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                                   ON

                               H.R. 5242

    TO AMEND TITLE 44 OF THE UNITED STATES CODE, TO PROVIDE FOR THE 
    SUSPENSION OF FINES UNDER CERTAIN CIRCUMSTANCES FOR FIRST-TIME 
            PAPERWORK VIOLATIONS BY SMALL BUSINESS CONCERNS

                               __________

                           SEPTEMBER 26, 2006

                               __________

                           Serial No. 109-263

                               __________

       Printed for the use of the Committee on Government Reform


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
                     http://www.oversight.house.gov


                     U.S. GOVERNMENT PRINTING OFFICE
45-345 PDF                 WASHINGTON DC:  2008
---------------------------------------------------------------------
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
Fax: (202) 512ï¿½092104 Mail: Stop IDCC, Washington, DC 20402ï¿½090001

                     COMMITTEE ON GOVERNMENT REFORM

                     TOM DAVIS, Virginia, Chairman
CHRISTOPHER SHAYS, Connecticut       HENRY A. WAXMAN, California
DAN BURTON, Indiana                  TOM LANTOS, California
ILEANA ROS-LEHTINEN, Florida         MAJOR R. OWENS, New York
JOHN M. McHUGH, New York             EDOLPHUS TOWNS, New York
JOHN L. MICA, Florida                PAUL E. KANJORSKI, Pennsylvania
GIL GUTKNECHT, Minnesota             CAROLYN B. MALONEY, New York
MARK E. SOUDER, Indiana              ELIJAH E. CUMMINGS, Maryland
STEVEN C. LaTOURETTE, Ohio           DENNIS J. KUCINICH, Ohio
TODD RUSSELL PLATTS, Pennsylvania    DANNY K. DAVIS, Illinois
CHRIS CANNON, Utah                   WM. LACY CLAY, Missouri
JOHN J. DUNCAN, Jr., Tennessee       DIANE E. WATSON, California
CANDICE S. MILLER, Michigan          STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio              CHRIS VAN HOLLEN, Maryland
DARRELL E. ISSA, California          LINDA T. SANCHEZ, California
JON C. PORTER, Nevada                C.A. DUTCH RUPPERSBERGER, Maryland
KENNY MARCHANT, Texas                BRIAN HIGGINS, New York
LYNN A. WESTMORELAND, Georgia        ELEANOR HOLMES NORTON, District of 
PATRICK T. McHENRY, North Carolina       Columbia
CHARLES W. DENT, Pennsylvania                    ------
VIRGINIA FOXX, North Carolina        BERNARD SANDERS, Vermont 
JEAN SCMIDT, Ohio                        (Independent)
BRIAN P. BILBRAY, California

                      David Marin, Staff Director
                Lawrence Halloran, Deputy Staff Director
                      Benjamin Chance, Chief Clerk
          Phil Barnett, Minority Chief of Staff/Chief Counsel

                   Subcommittee on Regulatory Affairs

                 CANDICE S. MILLER, Michigan, Chairman
CHRIS CANNON, Utah                   STEPHEN F. LYNCH, Massachusetts
MICHAEL R. TURNER, Ohio              WM. LACY CLAY, Missouri
LYNN A. WESTMORELAND, Georgia        CHRIS VAN HOLLEN, Maryland
JEAN SCHMIDT, Ohio

                               Ex Officio

TOM DAVIS, Virginia                  HENRY A. WAXMAN, California
                       Ed Schrock, Staff Director
                Erik Glavich, Professional Staff Member
                         Benjamin Chance, Clerk
                     Krista Boyd, Minority Counsel


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on September 26, 2006...............................     1
Text of H.R. 5242................................................     7
Statement of:
    Neugebauer, Hon. Randy, a Representative in Congress from the 
      State of Texas; and Hon. David Vitter, a U.S. Senator from 
      the State of Louisiana.....................................    14
        Neugebauer, Hon. Randy...................................    14
        Vitter, Hon. David.......................................    22
    Wordsworth, James M., president, J.R.'S Stockyards Inn, 
      McLean, VA; Karen Harned, executive director, NFIB Legal 
      Foundation, National Federation of Independent Businesses; 
      and J. Robert Shull, deputy director, Auto Safety and 
      Regulatory Policy, Public Citizen..........................    32
        Harned, Karen............................................    43
        Shull, J. Robert.........................................    55
        Wordsworth, James M......................................    32
Letters, statements, etc., submitted for the record by:
    Harned, Karen, executive director, NFIB Legal Foundation, 
      National Federation of Independent Businesses, prepared 
      statement of...............................................    45
    Miller, Hon. Candice S., a Representative in Congress from 
      the State of Michigan, prepared statement of...............     4
    Neugebauer, Hon. Randy, a Representative in Congress from the 
      State of Texas, prepared statement of......................    17
    Shull, J. Robert, deputy director, Auto Safety and Regulatory 
      Policy, Public Citizen, prepared statement of..............    57
    Vitter, Hon. David, a U.S. Senator from the State of 
      Louisiana, prepared statement of...........................    25
    Wordsworth, James M., president, J.R.'S Stockyards Inn, 
      McLean, VA, prepared statement of..........................    34


          H.R. 5242, THE SMALL BUSINESS PAPERWORK AMNESTY ACT

                              ----------                              


                      TUESDAY, SEPTEMBER 26, 2006

                  House of Representatives,
                Subcommittee on Regulatory Affairs,
                            Committee on Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2 p.m. in room 
2203, Rayburn House Office Building, the Honorable Candice S. 
Miller (chairman of the subcommittee) presiding.
    Present: Representatives Miller, Lynch, and Neugebauer.
    Staff present: Ed Schrock, staff director; Rosario 
Palmieri, deputy staff director; Erik Glavich and Kristina 
Husar, professional staff members; Benjamin Chance, chief 
clerk; Krista Boyd, minority counsel; and Cecelia Morton, 
minority office manager.
    Mrs. Miller. Good morning. The Subcommittee on Regulatory 
Affairs will come to order. I'm sorry I'm running a few minutes 
late, running up the hill.
    We certainly want to welcome you all to today's hearing, 
particularly our special guest, Senator Vitter. We are 
absolutely delighted, sir, that you could take the time to come 
and testify before our committee on this very important topic. 
Certainly a good friend and great friend in the House, 
Representatives Neugebauer, as well. We certainly appreciate 
you bringing this to the subcommittee's attention and being 
here as well.
    Today we are going to be hearing from witnesses regarding 
H.R. 5242, which is also titled the Small Business Paperwork 
Amnesty Act. Representative Neugebauer introduced this bill in 
April of this year and at the same time, Senator Vitter 
introduced a companion bill, S. 2556.
    The Small Business Paperwork Amnesty Act would really give 
small businesses the ability to correct a first-time paperwork 
violation within 6 months, as long as the violation does not 
harm the public interest, affect internal revenue laws or 
threaten the public health or safety. Importantly, a small 
business would not be exempt from a monetary penalty if the 
head of an agency determines that the violation has a potential 
of causing harm or impairs the ability to detect criminal 
activity.
    According to the U.S. Small Business Administration, there 
are about 25 million businesses with less than 20 employees. 
These firms actually account for over 97 percent of all U.S. 
businesses and roughly 30 percent of all employment. Nearly 6 
out of every 10 workers are employed at a business with less 
than 500 employees. Their payroll contributions and tax base 
constitute the economic heart and the backbone, certainly, of 
our competitiveness in the global marketplace.
    Federal policies should help them succeed, and help to 
foster their advancement. But oftentimes this is not the case. 
Sadly, agency bureaucrats are more concerned with meeting 
monetary quotas for enforcement than ensuring compliance with 
the regulations. This attitude is well ingrained within 
agencies and unfairly punishes small businesses.
    The regulatory burden on small business is much greater 
than the burden imposed on larger firms. Firms with more than 
500 employees pay roughly $5,300 per employee to comply with 
Federal regulations. But businesses with less than 20 employees 
pay more than $7,600 per employee, or about 45 percent more, 
just for regulatory compliance. This burden has not been forced 
upon them by foreign governments engaged in unfair trade 
practices, it actually has been forced upon them by us. So we 
need to take a very good look in the mirror here I think at the 
Federal level.
    And I'm certainly not proposing that we abolish 
regulations. The integrity of regulations that keep our water 
and our air clean and protect our children and society from 
harm is really a reflection of the ideals that all of us 
uphold. I'm suggesting that the Government provide small 
businesses some form of monetary relief from insignificant 
paperwork violations to ease the disproportionate burden that 
they face. This would really help small businesses, I think, 
without sacrificing regulatory safeguards. The legislation that 
we are going to be dealing with today, again, introduced by 
Representative Neugebauer and Senator Vitter, attempts to do 
exactly that. If a small business has a paperwork violation 
that essentially does not present a danger to the public health 
or safety or violate Internal Revenue laws, then the Federal 
agency citing the business is required to waive the civil fines 
for the first time only.
    And I would mention that this is really not a new idea. 
Actually, Senator Feingold introduced legislation in the 104th 
Congress that included a provision very similar to H.R. 5242. 
In both the 105th and the 106th Congresses, the House passed 
regulatory reform initiatives that included the language that 
we are discussing today. Both bills passed with bipartisan 
support. Fifty-four Democrats voted for the measure in 1998 and 
64 voted for it in 1999.
    In March 1998, the predecessor of this subcommittee held 
hearings on the legislation. It was introduced by then-
subcommittee chair David McIntosh of Indiana and Ranking Member 
Dennis Kucinich of Ohio. At the time, our colleague Mr. 
Kucinich offered a very good reason why members of the 
subcommittee should be supportive of the provision that 
provides penalty relief for a first-time paperwork violation. 
He stated, ``I would like to stress that this is a very 
important point for every member of the committee and the 
public to be aware of, that this penalty relates only to civil 
fines not of a criminal nature. We have made sure to include 
language that seeks to protect the health and safety of the 
public.'' I mention that because I think it is important to 
point out that this should be viewed in a bipartisan prism.
    Congress is not the only branch of Government trying to 
compel agencies to provide penalty relief to small businesses. 
In April 1995, President Clinton issued a memorandum directing 
the heads of 27 departments and agencies to waive penalties to 
the extent permitted by law for small businesses. The standards 
dictating when an agency should waive a fine are essentially 
the same as those included in the legislation that we will be 
examining today.
    Unfortunately, Federal agencies did not and have not taken 
seriously the directive to reduce or waive fines for small 
businesses committing an insignificant first-time paperwork 
violation. In fact, many argue that things could be getting 
worse. Congress passed the Small Business Regulatory 
Enforcement Fairness Act a year after President Clinton 
directed agencies to provide penalty relief to small 
businesses. Among other things, the law requires agencies to 
establish policies to provide penalty relief to small 
businesses. It has been a decade since that law took effect, 
and we are still sort of concerned with the ``gotcha'' approach 
to regulatory enforcement. I think again it is time for 
Congress to take back some of the discretion that we have given 
to the agencies. Agencies seem unwilling to implement fair 
penalty relief to small businesses on their own, despite the 
wishes of Congress and Presidents. Again, I think it is time 
for Congress to mandate true penalty relief for the small 
businesses that are really the engine of our economy. Again, I 
want to thank the witnesses for being here. We certainly look 
forward to your testimony, to both of you. At this time I would 
like to recognize the distinguished ranking member of the 
subcommittee, Mr. Lynch.
    [The prepared statement of Hon. Candice S. Miller and the 
text of H.R. 5242 follow:]

[GRAPHIC] [TIFF OMITTED] T5345.001

[GRAPHIC] [TIFF OMITTED] T5345.002

[GRAPHIC] [TIFF OMITTED] T5345.003

[GRAPHIC] [TIFF OMITTED] T5345.040

[GRAPHIC] [TIFF OMITTED] T5345.041

[GRAPHIC] [TIFF OMITTED] T5345.042

[GRAPHIC] [TIFF OMITTED] T5345.043

[GRAPHIC] [TIFF OMITTED] T5345.044

    Mr. Lynch. Thank you, Madam Chair. I join the Chair in 
welcoming our colleagues. We appreciate your being here today 
to talk about your legislation. I want to begin by commending 
you both for your commitment to helping small businesses.
    As we discussed at a recent hearing in this subcommittee, 
the Government's paperwork burden in the last 5 years has 
increased by over a billion hours. I think our efforts in terms 
of helping small businesses are best aimed at reducing the 
unnecessary part of that paperwork.
    The legislation we are discussing today, H.R. 5242, has 
been around for a number of years now. I believe the bill 
overall is very well intended. Unfortunately, I don't think 
that this bill would reduce paperwork for small businesses. 
Instead it would encourage companies to break the law or 
circumvent the law. Under the Small Business Regulatory 
Enforcement Fairness Act, agencies are required to have 
policies in place for reducing or waiving civil penalties for 
small businesses, as the Chair noted. I think instead our focus 
should be on causing those agencies to waive those penalties 
when appropriate. Agencies should use this authority when 
appropriate, but this discretion should be left to the agencies 
charged with enforcing the law. I certainly agree that there 
are many instances where waiving the fines and penalties are 
appropriate.
    H.R. 5242 would prohibit an agency from assessing a civil 
fine against a small business for a first time information 
collection violation. This would not just cover technical 
paperwork violations, it would also cover any information 
collection requirement, no matter how important ultimately.
    Here are some examples of information collection covered by 
this bill: EPA requires that lead paint disclosures require 
landlords to notify prospective tenants about any known or 
potential lead paint hazard in a home prior to leasing it. 
Earlier this year, an administrative law judge upheld the civil 
penalties assessed by EPA against two Rhode Island companies 
that violated the lead paint disclosure rule after at least 
four children suffered from lead poisoning.
    Another example, the Emergency Planning and Community Right 
to Know Act requires companies to report the presence of 
hazardous chemicals at a facility. And firefighters and local 
responders depend on having this information before they 
respond to a fire so they can properly protect themselves. In 
2001, three firefighters were killed from an explosion of a 
hazardous material at a hardware store. Similarly, OSHA 
requires companies to notify workers of particular hazards in 
the workplace.
    Earlier this month, OSHA cited a company partly for the 
company's failure to communicate to employees the hazards of 
working in a confined space after non-ventilated workspace 
contributed to the deaths of three workers. EPA and the 
Department of Transportation reporting requirements for 
transporting hazardous materials would also be circumvented by 
this legislation.
    In 2005, two freight trains collided in South Carolina, 
releasing an estimated 11,500 gallons of chlorine gas, which 
caused 9 deaths and at least 529 people were sent to the 
hospital. The Public Health, Security and Bioterrorism 
Preparedness and Response Act of 2002 would also be affected. 
That law requires companies that manufacturer, process or pack 
food for human or animal consumption in the United States to 
register with the FDA. That allows us to track them. If a 
company is not registered with the FDA and is making 
contaminated food, it could be very difficult for the FDA to 
trace back the contamination. Right now, we are seeing the 
impact of an e-coli impact from spinach. And we are having a 
heck of a time tracing down the source of that. CDC has 
reported 175 cases of e-coli so far, and it would help if we 
had all those companies complying with the filing requirement.
    Section 409 of the Sarbanes-Oxley Act requires public 
companies to promptly disclose material changes in a company's 
financial condition to allow investors the opportunity to make 
informed decisions. This would be waived.
    We also have a provision that in order to prevent illegal 
immigrants from working in the United States, employers are 
required to verify that workers are eligible to work in the 
United States by completing an INS form I-9. This would also 
allow those employees to fail to file. It is tough to police 
without the filing. Yet there would be no penalty.
    Agencies already must deal with fewer and fewer resources, 
which makes it hard enough to enforce these important laws. 
This bill would make this task even tougher. The exceptions in 
H.R. 5242 are very, very narrow, too narrow to fix the glaring 
problem. These exceptions can only be used if the head of an 
agency makes a finding, for example, that a violation has the 
potential to cause serious harm.
    But in the first instance, the agency often has to become 
aware of the need to take an enforcement action based on the 
information collected from a company. So if they are not filing 
the information, we will never know about it. An agency may not 
know whether a violation presents a danger to the public until 
it is too late.
    Giving companies a free pass to break the law would weaken 
the incentives of small businesses to comply with the law, 
because they would know that even if they got caught they 
wouldn't face consequences. The fact of the matter is, the 
overwhelming majority of small businesses obey the law. This 
bill would put those law-abiding companies at a severe 
disadvantage competitively with those who break the law. We 
need to look carefully at how we can help the small businesses 
that are doing the right thing and need a break in a way that 
doesn't jeopardize our health, safety and environmental 
protection.
    Madam Chair, I yield back.
    Mrs. Miller. Thank you very much.
    Our first witness this afternoon is Congressman Randy 
Neugebauer, from the 19th District of the great State of Texas. 
He is the author, of course, of the legislation that we are 
discussing today, H.R. 5242, the Small Business Paperwork 
Amnesty Act of 2006. The Congressman is in his second term of 
office and he serves on the House Committee on Agriculture as 
well as Financial Services. Before coming to Congress, he 
served as the President and CEO of Lubbock Land Co., which is a 
residential and commercial land development company which 
created many successful subdivisions in that area. So he 
certainly understands the challenges that are faced by many 
small businesses, and we welcome you to the subcommittee and 
look forward to your testimony, sir.

   STATEMENTS OF HON. RANDY NEUGEBAUER, A REPRESENTATIVE IN 
CONGRESS FROM THE STATE OF TEXAS; AND HON. DAVID VITTER, A U.S. 
              SENATOR FROM THE STATE OF LOUISIANA

               STATEMENT OF HON. RANDY NEUGEBAUER

    Mr. Neugebauer. Madam Chairman, thank you very much. I also 
want to congratulate Senator Vitter and the city of New Orleans 
and the State of Louisiana on a great night last night. I know 
all of us are excited about the things that are going on there. 
I also appreciate the Senator's support of this legislation.
    Chairman Miller, Ranking Miller Lynch, members of the 
subcommittee, thank you for the opportunity to appear before 
this subcommittee to discuss an issue of tremendous importance 
to small businesses. I appreciate your willingness to hold this 
hearing at my request. Most of us can agree that the Federal 
Government requires a substantial amount of paperwork for small 
businesses. When I listen to small business owners back home in 
West Texas, they continually reaffirm this reality, and they 
want me to know that what we are doing here in Washington is 
impacting them.
    As a former small business owner myself, I can sympathize 
with their frustration. For these reasons, I introduced the 
Small Business Paperwork Amnesty Act in April of this year. I 
strongly believe that this legislation will go a long way in 
reducing this burden by bringing some common sense to the 
relationship between small business owners and the Federal 
Government.
    Over the past decade there has been a growing effort in 
Congress to reduce the burden the Federal Government places on 
small businesses. While there have been some small victories 
along the way, this effort has met fierce opposition by special 
interest groups and not surprisingly from the Federal 
regulators themselves. In the late 1990's, former 
Representative David McIntosh, who was chairman of this 
subcommittee, introduced a similar bill that was approved by 
this subcommittee. While a broader scope, Mr. McIntosh's bill, 
the Small Business Paperwork Reduction Act of 1998, included 
the same provisions that are found in the Small Business 
Paperwork Amnesty Act that I have introduced. The House of 
Representatives passed that bill overwhelmingly with an 
overwhelming majority. Unfortunately, our colleagues in the 
Senate were unable to pass with similar results.
    Some may wonder, why am I taking on this issue almost 8 
years later? Well, the fact is, time has not diminished the 
need for this legislation. If anything, the passage of time has 
only increased the need. According to the National Federation 
of Independent Businesses, which you will hear from today, 
small businesses with fewer than 20 employees face regulatory 
costs of over $7,600 per employee per year. Each year these 
costs continue to increase because the Federal regulations 
continue to increase.
    Today you will also hear from Mr. Jim Wordsworth, who 
operates J.R.'s Stockyards Inn located in McLean, Virginia. He 
will testify about the amount of regulation he must comply with 
and the impact on his business. I can sympathize with Mr. 
Wordsworth, because I have been in his shoes before. Indeed, 
many business owners live in fear of Federal regulations. This 
fear is not because they are in violation of any regulations 
that they know about, but because they may be in violation of 
regulations that they are not even aware of.
    This ``gotcha'' mentality on the part of the Federal 
agencies is at odds with the core principles of our economy. I 
believe we have the responsibility to fight this mind set. We 
must begin with common sense reforms.
    From my personal experience, I know that for a small 
business owner to be successful, he must diligently manage his 
two greatest assets: resources and time. More often than not, 
these things are in short supply. The cost of compliance to 
obscure regulations further eat away at both. We must find ways 
to help small business owners comply with paperwork 
requirements so that they can devote more time and resources to 
growing their businesses, creating new jobs, and thus expanding 
the economy.
    Due to the sheer volume and complexity of the Federal 
regulations, even the most diligent small business owner may 
inadvertently make an error or miss a deadline associated with 
Government paperwork. The Small Business Paperwork Amnesty Act 
will prevent bureaucratic agencies from imposing excessive 
civil fines on small businesses for first-time inadvertent 
paperwork violations. This bill will not exempt any business 
from any paperwork requirements. I want to repeat that comment: 
this bill will not exempt any business from any paperwork 
requirements. It just gives leeway for business owners to 
correct first-time mistakes. If the business does not comply 
within the first 6 month period, the fine will be imposed.
    Furthermore, this legislation will provide relief while 
still providing for the safety and health of our communities. 
Only those paperwork violations that do not threaten the public 
welfare will be eligible for a second chance. A common 
misconception concerning this legislation is that it will 
somehow lead to more non-compliance or that agencies could not 
enforce penalties for violations that could harm the public. 
This is simply not the case. In the event that a paperwork 
violation would harm the public welfare or present an imminent 
threat to the environment, this bill gives the agency full 
discretion to impose civil fines under the law.
    However, the agency may give the small business, and I 
would say may give the small business owner, 24 hours rather 
than 6 months to fix the violation. In other words, if a 
company swiftly and faithfully correct an inadvertent mistake, 
only then will they be eligible to receive a second chance 
under this bill. By giving these agencies this broad 
discretion, we can be confident that those agencies will be 
able to use this authority to carry out the mandate that we 
have entrusted them to fulfill. The Small Business Paperwork 
Amnesty Act strikes the right balance between reducing the 
burden placed on small businesses and our responsibility to 
protect communities and the environment.
    In closing, I would like to say that here in Washington, it 
is easy for some of us to forget the proper role of Government, 
the reason that we are here in the first place. Personally, I 
believe that Government is accountable to the people and not 
the other way around. This philosophy is at the heart of this 
legislation and I hope that this can be the basis of our 
discussion here today. Again, thank you, Chairwoman Miller, for 
holding these important hearings. I look forward to the 
testimony of my colleague, Senator Vitter, and the witnesses on 
the second panel. Thank you.
    [The prepared statement of Hon. Randy Neugebauer follows:]

    [GRAPHIC] [TIFF OMITTED] T5345.004
    
    [GRAPHIC] [TIFF OMITTED] T5345.005
    
    [GRAPHIC] [TIFF OMITTED] T5345.006
    
    [GRAPHIC] [TIFF OMITTED] T5345.007
    
    [GRAPHIC] [TIFF OMITTED] T5345.008
    
    Mrs. Miller. Thank you very, very much, Representative. We 
appreciate that testimony. Senator Vitter, out next witness, we 
certainly appreciate your coming. Actually, before you were 
elected to the Senate, you served three terms in the House of 
Representatives where you were a member of the Government 
Reform Committee.
    During his tenure in the House, he authored and passed 
legislation establishing a prescription drug program for 
military retirees, advancing missile defense and cleaning up 
Lake Pontchartrain as well. For his work in Congress, Senator 
Vitter has received numerous awards from leading organizations, 
such as Americans for Tax Reform, the 60 Plus Association and 
the Family Research Council. In the Senate, he serves on the 
Committees of Commerce, Science and Transportation, Environment 
and Public Works and Small Business and Entrepreneurship.
    We are certainly glad to have you back on our side of the 
Capitol, Senator, and the floor is yours, sir.

                 STATEMENT OF HON. DAVID VITTER

    Senator Vitter. Thank you very much, Madam Chair. Thanks 
for the invitation and thanks for your leadership. It is a real 
honor and pleasure to be here, particularly since I am a former 
House Member and a strong conservative. As both, I don't drink 
from the water fountains over there, so it is particularly 
refreshing to get back here, where I can do that freely and 
breathe a little fresh air. Thank you for having this very 
important hearing about a very important topic.
    I share Randy's concerns, because I share his experiences. 
I know in Louisiana, I talk to business, particularly small 
business folks all the time. And they always talk to me about 
the regulatory and the paperwork burden. I hear directly those 
stories about their dealing with EPA or the Army Corps of 
Engineers, the Coast Guard, SBA, Commerce, IRS, Customs, just 
to name a few. Of course, on top of that, there is a State 
bureaucracy that poses additional issues, Department of 
Revenue, Labor, Wildlife and Fisheries, Insurance. So they face 
a real burden which has been growing as they face other growing 
burdens, health care costs and other things. It is just getting 
out of hand and they tell me about that very directly, as they 
do to Randy in his home district.
    Having lived in the last couple of years through Hurricanes 
Katrina and Rita, in some sense some of those experiences have 
been magnified even more. Because of course you have an 
extraordinary presence now of certain agencies like FEMA and 
the Corps of Engineers. Unfortunately, although there has been 
extraordinary commitment by the Congress, and extraordinary 
help in many ways, unfortunately the sort of paperwork burden 
is pretty extraordinary in a lot of those cases, too. So I hear 
directly about that.
    And of course, a lot of this, as you said yourself, has 
been quantified by folks like the SBA Office of Advocacy. You 
mentioned businesses with fewer than 20 employees spending more 
than $7,600 per employee just to comply with Federal 
regulations. NFIB estimates that all told, Americans spend 
about $400 billion, $400 billion with a B, on this Federal 
paperwork cost. That is the same general amount of spending 
that we are going to pass later this week in the Defense 
Appropriations bill, to fund all of our defense when we are at 
war. It is pretty staggering that we are wasting that same 
amount on pure paperwork burden.
    Now, I certainly want to echo Randy's words and your words, 
we are not getting rid of a single requirement. We need to do 
that. We are acting to do that through other legislation. But 
in this bill, we are not getting rid of a single requirement. 
We are certainly not stripping away key health and safety 
regulation. We are simply adopting a common sense rule while we 
work through these regulations, while we hopefully narrow the 
scope and lessen the burden. While we do that, a simple rule 
that first-time violators will get some relief if the 
regulation at issue doesn't affect public health and safety.
    With regard to that, I certainly want to directly address 
the comments of your ranking member. I am sorry he couldn't 
stay, because I really wanted to have this discussion with him. 
Virtually every example he used, if not every single example he 
used, clearly falls into the exceptions in the bill, clearly 
his focus went directly at public health and safety or 
potential serious harm to the public interest. So in the bill, 
we clearly address that and clearly say no, we are not talking 
about that. That isn't automatically waived. It could be 
waived. There is discretion to waive it if the company comes in 
and complies within 24 hours, which is obviously a very narrow 
timeframe. And even then, the regulatory agencies doesn't have 
to waive the civil penalty.
    I think this is an enormously important point. Again, 
virtually all if not every case he mentioned, is accepted in 
the bill. In other words, those cases would not be governed by 
the normal meat of the bill. It would be an exception to the 
bill.
    And again, what are we talking about? Well, the violation 
would cause serious harm to the public interest. Everything he 
said would have done that. If it would impair criminal 
investigations, if it would concern the collection of taxes, if 
it would present a danger to public health or safety, I think 
about everything Congressman Lynch said, would do that. Again, 
in those cases there wouldn't be this waiver.
    And again, as Randy mentioned, I think it is very important 
to say, we are only talking about civil penalties. Congressman 
Lynch repeatedly used the term breaking the law, which is 
technically correct, but it certainly makes it sound criminal. 
And by definition, we are not talking about anything criminal, 
by definition.
    Again, this is really important to folks I represent. This 
is really important to small business in Louisiana, was before 
Hurricanes Katrina and Rita, it is even more so now because we 
have greater need and therefore greater Federal help and 
resources, which is great. But also much greater regulatory 
burden as part of the Stafford Act and all of hurricane 
response. We are certainly not complaining about the very 
generous response, but it makes this sort of common sense 
approach to a regulatory and paperwork burden that has gotten 
out of hand even more important right now.
    With that, Madam Chair, I thank you again for the kind 
invitation for me to be here. I thank Representative Neugebauer 
again for his leadership on this. I should say, and I want to 
give credit where credit is due, we have both picked up the 
mantle of folks who have come before us. Dave McIntosh, who was 
in the Congress before us, started this. We took over the bill 
from him. There have been others, as you mentioned, including 
Democrats who have proposed largely the same thing. We are 
continuing that fight, and it is something we absolutely need 
to do quickly.
    Thank you.
    [The prepared statement of Hon. David Vitter follows:]

    [GRAPHIC] [TIFF OMITTED] T5345.009
    
    [GRAPHIC] [TIFF OMITTED] T5345.010
    
    [GRAPHIC] [TIFF OMITTED] T5345.011
    
    Mrs. Miller. Thank you very much, both of you. We are 
delighted to have you both here and certainly when 
Representative Neugebauer approached me on this issue, I was 
very enthusiastic about holding this subcommittee hearing on 
this piece of legislation. This is a committee that has really 
studied what we can do to assist every level of business, quite 
frankly, in America, with various types of regulatory burdens.
    I appreciated your comment that you think in Government we 
need to be accountable to the people. Sometimes we all have to 
remember that famous saying, I am from the Government and I am 
here to help you. When small businesses and others hear us say 
that, they dive for cover under the table sometimes.
    One of the first hearings we actually had in this 
subcommittee, Governor John Engler, former Governor from the 
great State of Michigan who is now the Executive Director of 
the National Association of Manufacturers, had a very 
interesting testimony to this subcommittee where he talked 
about a study that NAM has done recently that shows that the 
structural burden, structural cost for American-made 
manufactured goods is about 22, 23 points higher than any of 
our foreign competitors. A principal region for that, a huge 
component, not the only reason, but a big reason for that is 
because of the regulatory burdens that businesses do face. So 
when we see exodus of manufacturing jobs or other types of 
industry that leaves our shores and perhaps goes to other 
countries in a competitive, global marketplace, if we are 
coming from Michigan, where you all know what is happening to 
the American automobile industry, we have unfortunately sort of 
an economic hurricane that is hitting Michigan right now. But 
as we see some of these jobs leaving our Nation to China or 
India or Mexico or wherever they are going, guess what? Those 
nations did not place these regulatory burdens on us. We did it 
to ourselves.
    So the idea that you have here I think is great. I know, 
Senator, you testified a bit about the burden, the regulatory 
cost of compliance for every level of business, but 
particularly small businesses that might have just a few 
employees. And it makes some inadvertent error, and then it is 
like a year in jail for jaywalking or something. I think the 
standard always has to be, what is reasonable. That is 
something that I think all of us in Congress, both Republicans, 
Democrats, what have you, need to look at.
    I guess I would ask this. How do you, particularly Senator, 
with the kinds of experiences that you have had in your State, 
the horrific natural things that have happened there, how do 
you foresee this piece of legislation helping a new business, 
perhaps a small business starting up, just trying to restart 
their business?
    Senator Vitter. Well, again, it gives a new business, a new 
small business a chance. There is a huge difference between the 
Xeroxes or the GMs of the world and small business, which 
account for most of the jobs in this country and an even 
greater percentage of the jobs in a State like Louisiana. One 
of the differences is big, big companies can have full time 
staffs. They have teams of people that comb through everything 
we pass, every Congress and how it impacts their business and 
what new reports they have to issue and how they are going to 
issue.
    Well, guess what? If you have a small business of 20 
people, you don't have that sort of team. In fact, you don't 
have a single person who can possibly do that. So we are 
talking about a brand new requirement that is often created by 
a brand new bill that we pass here that a small business of 20 
people in Louisiana has no idea has come into existence. All of 
a sudden, they can be hit for very serious civil fines the 
first time there is non-compliance.
    This is simply saying, first-time offense, and again, this 
is very important, that is what we are talking about, first-
time offense, we are not talking about a pattern, we are not 
allowing that to develop. First-time offense, civil penalty, 
you are not putting people in a health or safety danger. That 
is going to be waived. That is a huge relief to small business. 
When you are trying to get a business up and running, that sort 
of monetary financial threat, just like a liability threat from 
lawsuits, can not only be crushing in practice, it can be so 
intimidating that you never start the venture.
    So I think it is a major factor. And I would echo your 
comments. We talk about the problems of global competition. To 
me, in any challenge you are facing in life, no matter what it 
is, as an individual, as a Congress, as a company, no matter 
what it is, there are some things that are going to be beyond 
your control, but there are some things that are going to be 
within your control. No matter what that challenge is, you are 
always a lot better off focusing on the things that are within 
your control and doing something about it. And this is within 
our control. And this is a factor in global competitiveness.
    I will be the first to admit, not everything that hurts us 
in that global competition is within our control. Labor costs 
in India are not within our control. This is. The regulatory 
environment, the litigation environment, the taxation 
environment is. We need to do something about it.
    Mrs. Miller. Representative Neugebauer, I would ask you the 
same question.
    Mr. Neugebauer. I think that is a great question. I was 
thinking back, and the way I relate to a lot of issues we have 
up here is from my own experience. I was thinking about in 1980 
when I started my construction company, my home building 
company. My day started early, getting on the phones and 
ordering materials to the jobs and then making sure that the 
subcontractors were going to be there, starting to tour the 
jobs and go back and discover that some materials that I had 
ordered weren't there, having to go back, this is pre-cell 
phone days, and call and make sure that the lumberyard--and all 
day long. Then trying to find the time to meet with a client so 
I could sell some more homes.
    When I think about the small business person today, whether 
it is a man or a woman, is that they wear so many hats. For 1 
hour I am the construction supervisor, I am the material 
orderer, I am the purchase agent, I am the accountant, I am 
payroll, I am compliance. And all of those various hats. When I 
first started in business in 1980, I spent about 90 percent of 
my time actually doing what I call productive things, that is 
selling and building, and 10 percent of my time was fooling 
around with compliance of various regulations.
    But over the years, I saw this huge increase in the amount 
of regulation, in the amount of governance in my industry to 
where I really, just before I came to Congress, realized I was 
spending 70, 80 percent of my time trying to make sure that I 
was in compliance with some very sophisticated rules and 
regulations that the Government put on me, because of 
punitiveness of the fine was major.
    So small businesses are capitalized thinly to begin with. 
And then you go in and start fining them for an inadvertent 
mistake, it sends the wrong signal to business. It sends the 
wrong signal to America as the Senator said. In America, 95 
percent of our jobs are created by small business people in 
this country. And in District 19, I can tell you about 100 
percent of them are, because we would love to have an 
automobile plant in District 19.
    But we don't have that. So I think what we are just saying 
here, and I think the term, using our head, using common sense, 
is the approach that we send the signal to small business, you 
know what, we want you to start a new business and we are going 
to help you start that new business, rather than saying, we 
can't wait for you to start that new business so we can get 
you. That is the signal that we are talking about here. We are 
trying to send a signal, let's start more small businesses. 
That is the American dream. And let's make Government a part of 
the solution and not part of the problem.
    Mrs. Miller. I appreciate that. My background, actually, 
before I got involved in politics, was in the marina business. 
My family sold boats for a living, my dad built some of the 
first fiberglass sailboats in the world, actually. I can 
remember as a kid being around the epoxies and the resins and 
all the woven, the different kinds of materials, etc. Today you 
can't have two or three guys in the back building a boat, 
because of the regulations. My brother is still in the boat 
business and I can't believe, I won't even tell you what he had 
to go through to put a paint booth in his place. But again, 
these are small businesses.
    But of course we want to ensure, I always say the standard 
has to be reasonable. We want to make sure that as we progress 
as a Nation that we do have reasonable standards in place for 
worker safety, for environmental kinds of regulatory affairs, 
etc. Let me just play the devil's advocate and ask a final 
question to you both, in the interest of time, since my ranking 
member unfortunately had to go to another hearing. I think he 
might ask this question if he was here, about some people are 
saying that because of this, you might have companies that 
would start doing things, like dump mercury into the lakes or 
some sort of pollution or what have you. What would your 
response be to somebody who would be very critical of this 
legislation? Either one of you?
    Senator Vitter. If a company starts dumping mercury into 
the environment because of this bill, they clearly haven't read 
the bill. Because that sort of violation clearly is not covered 
in the bill. That clearly impacts public health and safety. 
That clearly doesn't get a pass at all.
    In addition, we are only talking about first-time 
violations. By definition we are not talking about a string or 
pattern of violations, we are not allowing that to develop. In 
addition, to get any waiver of civil penalties, the folks have 
to comply. So they have to comply with the requirement, all the 
requirements. So again, I think it was rather distracting to 
the discussion, to put it kindly, when Congressman Lynch went 
through this litany of abuses that clearly, clearly fall within 
the category of public health and safety threat. Because those 
don't get an automatic pass under the bill at all.
    Mr. Neugebauer. I think Congress can testify to the fact 
that we can't legislate morality, and we can't legislate people 
doing the right thing. We have given it a really good try for 
about 230 years, and we have figured out that people that are 
going to obey the law, that are going to uphold the law, that 
are going to play by the rules are going to do their very best 
to do that. There are always going to be those.
    The good news about this, this bill has no benefit for 
those people who don't want to play by the rules. It has 
absolutely no benefit for them. This bill is for the good guys, 
the good men and women that are trying to run a small business, 
keep their small business. And as the Senator said, if you have 
a pattern saying, oh, yes, I forgot that report again, you 
don't get any help under this bill, because we have been down 
that road with you before, this isn't your first time. As we 
say in Texas, this isn't your first rodeo.
    So what I think the people that would talk about that are 
trying to distract from this bill are the same people that want 
to pass more regulations, want to make more burden on small 
businesses and aren't really interested in giving small 
business a break. That is really what this does, is it gives 
small business people a break, gives them a second chance.
    Mrs. Miller. OK. Thank you again very, very much for taking 
time out of your schedule to testify before the subcommittee. 
Representative, I certainly look forward to continuing to work 
with you to push this very necessary legislation through the 
process if we can.
    Thank you both very much. We will adjourn for a moment for 
our next panel.
    [Recess.]
    Mrs. Miller. Before you all sit down, I will ask you all to 
raise your right hands. Because the subcommittee has subpoena 
authority, we swear everybody in.
    [Witnesses sworn.]
    Mrs. Miller. Thank you very much.
    We appreciate you all coming to the second panel. Our first 
witness of the second panel this afternoon is Mr. James 
Wordsworth, who is the owner of J.R.'s Stockyards Inn in 
Virginia, located at Tyson's Corner. In addition to J.R.'s 
Steakhouse, he is also the owner of two corporate picnic 
facilities in McLean and Leesburg, VA, an off-premises catering 
company, a marina in Stafford County and a company that builds 
and designs modular prisons. Mr. Wordsworth has served as a 
general partner in several small limited partnerships that 
acquired raw land and planned, zoned and developed 
subdivisions, featuring amenities such as golf courses and 
waterfronts. He is here today representing the U.S. Chamber of 
Commerce, where he was elected to the board of directors in 
June 2001.
    Mr. Wordsworth, we appreciate your attendance today and the 
floor is yours, sir.

STATEMENTS OF JAMES M. WORDSWORTH, PRESIDENT, J.R.'S STOCKYARDS 
 INN, MCLEAN, VA; KAREN HARNED, EXECUTIVE DIRECTOR, NFIB LEGAL 
FOUNDATION, NATIONAL FEDERATION OF INDEPENDENT BUSINESSES; AND 
 J. ROBERT SHULL, DEPUTY DIRECTOR, AUTO SAFETY AND REGULATORY 
                     POLICY, PUBLIC CITIZEN

                STATEMENT OF JAMES M. WORDSWORTH

    Mr. Wordsworth. Thank you, Chairwoman Miller. My name is 
Jim Wordsworth, I am the owner of J.R.'s Stockyards Inn, a fine 
dining steakhouse in McLean, Virginia. I am also the owner of 
several other small businesses, and a marina is one, and I 
understand that is your family's background as well.
    I am here today on behalf of the U.S. Chamber of Commerce. 
I would like to begin by pointing out that there are several 
common threats that are universal to Government paperwork: the 
burdens imposed by agencies on businesses and individuals. 
First is the sheer volume of paperwork requested. I hold in my 
hand a 266-page document, I would like for you to see this 
document. These are single spaced documents that list the 5,960 
forms, and these are just the lists of the forms, not the 
forms, forms and instructions generated by 109 bureaus and 
departments of 49 agencies. That is within the Federal 
Government. It does not include the State and local government 
agency forms.
    If I were to print all the forms and the instructions out, 
print them out, the stack of paper would exceed the height of 
the tallest person in this room. And that stack only grows. In 
its 2002 report to Congress, OMB stated that all agency 
regulations imposed over 7.65 billion hours of paperwork in 
fiscal year 2001. Just 4 years later, that total has risen to 
8.4 billion hours. This represents an increase of 750 million 
hours.
    The second point I would like to make is when Government 
agencies estimate the time it takes to fill out the paperwork, 
they almost never take into account the time it takes to 
collect, to organize, and retrieve the information that they 
have asked for. If they take into account this number, it would 
be much larger.
    The third characteristic that most forms have in common is 
that there generally is a penalty associated with filling out 
the forms incorrectly. In many cases, the penalty applies 
whether the mistake was intentional or not. Although I try to 
fill out every form in a timely manner, with due diligence and 
care, as a small business owner my primary concern is running 
my business and keeping my customers happy. Having provisions 
passed in the law such as those contained in H.R. 5242, the 
Small Business Paperwork Amnesty Act of 2006, that provides for 
the suspension of fines under certain circumstances for first-
time paperwork violations by small business owners like myself, 
would act as a fail-safe in the case that I make an inadvertent 
error when filling out such a form.
    This bill is strongly supported by the U.S. Chamber and 
contains adequate protections to avoid excusing fines, adequate 
protections to avoid excusing fines, for violations that could 
present a danger to public health or safety or cause serious 
harm to the environment or public interest that Congressman 
Lynch pointed out.
    I would like to also highlight just a few examples of how 
this bill, if enacted into law, could affect my business. The 
Census Bureau has a number of forms that are sent out to 
businesses for the collection of data in order to distill the 
results into valuable statistical information. Just recently, 
my wife and I were in an unfortunate accident that required a 
lengthy rehabilitation. During this time away from our 
business, both of us away, if one of my employees inadvertently 
misplaced or disposed of a census survey request for data, not 
realizing the importance of the document, or attempted to fill 
it out and didn't fill it out correctly or completely to the 
best of their knowledge, my company could be fined up to $500. 
I have very capable managers that work for me and run my 
business while we are out. But their expertise is in running 
the business, not in filling out forms.
    Additionally, during my wife's and my convalescence, the 
management had to do extra duty to make up for our absence, so 
they worked very long hours. It could be very understandable 
and foreseeable that under those conditions that this type of 
request could fall through the cracks. Adequate safe harbors 
contained in this bill would provide me with a cushion that is 
needed to avoid an expensive fine during this very difficult 
time.
    Another example where the bill's provisions may apply is in 
filling out I-9 forms. Under current law, first-time 
immigration paperwork violations, which are very complex, for 
failure to properly prepare and file I-9 forms, could result in 
civil penalties from $100 to $1,000.
    The concept of waiving penalties for minor paperwork 
violations for small businesses is not something new. Section 
223 of Public Law 104-121 requires agencies to establish a 
policy or program to provide for the reduction, and under 
appropriate circumstances for the waiver of civil penalties for 
violations by small businesses. Passage of H.R. 5242 would 
incrementally extend the existing law to apply what agencies 
already do and have already been doing for all paperwork 
violations to first-time minor paperwork violations, something 
that from my point of view would seem very logical and very 
helpful and consistent with the current intent of Congress 
under the present law.
    In closing, I would like to again thank the committee for 
holding this hearing and for its interest in the Small Business 
Paperwork Amnesty Act. I would welcome any questions that you 
might have.
    [The prepared statement of Mr. Wordsworth follows:]

    [GRAPHIC] [TIFF OMITTED] T5345.012
    
    [GRAPHIC] [TIFF OMITTED] T5345.013
    
    [GRAPHIC] [TIFF OMITTED] T5345.014
    
    [GRAPHIC] [TIFF OMITTED] T5345.015
    
    [GRAPHIC] [TIFF OMITTED] T5345.016
    
    [GRAPHIC] [TIFF OMITTED] T5345.017
    
    [GRAPHIC] [TIFF OMITTED] T5345.018
    
    [GRAPHIC] [TIFF OMITTED] T5345.019
    
    [GRAPHIC] [TIFF OMITTED] T5345.020
    
    Mrs. Miller. Thank you very much. We appreciate your coming 
today, sir.
    The committee is now delighted to welcome Karen Harned. Ms. 
Harned is the executive director for the National Federation of 
Independent Business Legal Foundation. As a member of a law 
firm, she specialized in food and drug law and represented 
several small businesses and their trade associations before 
Congress and Federal agencies. She received her law degree from 
the George Washington Law School in 1995.
    We are delighted to have you, and the floor is yours.

                   STATEMENT OF KAREN HARNED

    Ms. Harned. Thank you. Good afternoon, Madam Chairwoman and 
members of the subcommittee. My name is Karen Harned, and I 
serve as Executive Director of NFIB's Legal Foundation, the 
legal arm of NFIB.
    NFIB is pleased to have the opportunity to be with you 
today offering our strong support for the Small Business 
Paperwork Amnesty Act of 2006. H.R. 5242 would provide hard 
working, well meaning small business owners with the 
opportunity to correct paperwork mistakes before they are 
forced to pay needless fines.
    NFIB would also like to thank Congressman Neugebauer for 
championing this bill and Senator Vitter for his continuing 
work on this bill in the Senate and the other issues that he is 
working on for small business in that body.
    When it comes to regulatory paperwork costs, small business 
gets stuck with the bill. A recent study performed for the 
Small Business Administration estimated that $1.1 trillion of 
the cost of regulation falls disproportionately on small 
businesses with 20 or fewer employees. That is $7,647 per 
employee per year.
    For the average NFIB member, which employs five people and 
reports gross sales of between $350,000 and $500,000 per year, 
this price tag is huge. It is almost $40,000 annually, 8 to 10 
percent of revenues generated from a small business's gross 
sales are paid out in regulatory costs. That does not even 
include Federal, State and local income taxes.
    Small businesses face a 45 percent greater regulatory 
burden than their larger counterparts. Unlike big businesses, 
small business owners do not have compliance departments or 
attorneys on staff to warn them of each and every regulation in 
the pipeline. Instead, those responsibilities fall to them.
    Does this mean that small business owners should get a free 
pass? Of course not. After working on behalf of small business 
for 4\1/2\ years, what I find most impressive about this 
constituency is their respect for the law and their desire to 
do the right thing. For example, according to an NFIB research 
foundation poll on the Family and Medical Leave Act, small 
businesses grant virtually all requests for family and medical 
leave, whether required to by the law or not.
    I thought it would be beneficial to provide a real life 
example of the types of mistakes that would be forgiven under 
H.R. 5242. Importantly, H.R. 5242 does not forget these 
mistakes. It merely gives well-meaning small business owners 
the opportunity to correct them. Non-compliance is not an 
option under this bill.
    Nancy Kleinfelter, an NFIB member, is President of 
Baltimore Glassware Decorators, a small 15-employee business. 
Her business must comply with EPA's toxic release inventory 
lead rule, which requires small businesses to provide EPA with 
detailed information regarding lead usage. Ms. Kleinfelter's 
business prints small quantities of custom glass and ceramic 
ware for proms, weddings, restaurants and novelty stores. In 
fact, her decorated mugs have been sold here at the House gift 
shop.
    Her business sometimes uses lead-bearing colors on outside 
surfaces of mugs and glasses which become part of the glass 
after they are fired and the lead does not leach out. After 95 
hours of work trying to comply with this rule, Ms. Kleinfelter 
could not have complete confidence that the numbers she was 
providing EPA were accurate.
    H.R. 5242 would give small businesses like hers a chance to 
fix mistakes that are made despite the small business owner's 
best efforts. Economic studies, polls and real-life examples 
all indicate why H.R. 5242 is such an important and necessary 
piece of legislation. Moreover, it enjoys bipartisan support 
going back to the Clinton administration.
    NFIB supports strong regulatory reform measures that would 
dramatically reduce the regulatory burdens placed on small 
business. However, until such reforms are enacted, H.R. 5242 is 
needed to stop the bleeding. The bill recognizes the tremendous 
regulatory burdens small businesses face while at the same time 
ensuring that the public policy objectives those regulations 
are designed to address are met. It does not reward or create 
loopholes for bad actors, but instead gives well-meaning, hard-
working small business owners a chance to correct unintended 
mistakes before being forced to pay civil fines for failing to 
dot every I and cross every T.
    On behalf of NFIB's members, 92 percent of whom indicate 
that they believe small business owners should be exempt from 
first-time paperwork violations, I commend you, Madam 
Chairwoman, for holding this hearing and inviting me to testify 
today. I would be pleased to answer any questions that you 
have. Thank you.
    [The prepared statement of Ms. Harned follows:]

    [GRAPHIC] [TIFF OMITTED] T5345.021
    
    [GRAPHIC] [TIFF OMITTED] T5345.022
    
    [GRAPHIC] [TIFF OMITTED] T5345.023
    
    [GRAPHIC] [TIFF OMITTED] T5345.024
    
    [GRAPHIC] [TIFF OMITTED] T5345.025
    
    [GRAPHIC] [TIFF OMITTED] T5345.026
    
    [GRAPHIC] [TIFF OMITTED] T5345.027
    
    [GRAPHIC] [TIFF OMITTED] T5345.028
    
    [GRAPHIC] [TIFF OMITTED] T5345.029
    
    [GRAPHIC] [TIFF OMITTED] T5345.030
    
    Mrs. Miller. Thank you very much.
    Our final witness today is Robert Shull, who is the deputy 
director of auto safety and regulatory safety for Public 
Citizen. Prior to joining Public Citizen, he served as director 
of regulatory policy at OMB Watch. Mr. Shull has worked at 
Children's Rights, a non-profit in New York that works 
nationwide filing class action civil rights suits on behalf of 
abused and neglected children in order to reform foster care.
    So we certainly appreciate your attendance today and look 
forward to your testimony as well, sir. The floor is yours.

                   STATEMENT OF ROBERT SHULL

    Mr. Shull. Thank you, Madam Chair. I am pleased to be able 
to come before you again, and I want to thank you for this 
opportunity, and I thank the subcommittee.
    I was really heartened to hear the opening words from you 
that I heard at the beginning of this hearing, which is that 
you are deeply concerned about finding a way to balance the 
needs of small business while protecting the public interest. I 
want to observe that when it comes to information collection 
and small businesses, there are really two kinds of ways we can 
go to try to strike that balance. One of them is a negative way 
which could reduce the amount of information collected or 
reduce the incentives for businesses to provide the information 
that we need. And the other way to go is the positive way, 
which is focused on helping small businesses to comply with 
their obligations without reducing the quality, the quantity or 
the utility of the information that we need to protect the 
public. I am here today because we believe that this bill 
follows this negative path rather than the positive path.
    I have heard first of all that this bill focuses on first-
time violations and doesn't address or does not exempt repeat 
offenders. But I do have to point out that there is a part of 
the bill that does allow a business to have many first-time 
violations. A business could fail to comply with an EPA 
requirement, that is the first time it has failed to comply 
with the EPA requirement. But it could also have a first-time 
violation of an OSHA requirement, a first-time violation of 
other Department of Labor requirements, a first-time violation 
of SEC filing requirements and so on.
    So we really could have a really bad actor who is failing 
to comply with requirements across the board but getting 
multiple first-time exemptions. I think that is one way that 
this bill does not address the possibility of a repeat 
offender.
    I also am concerned about the public interest exceptions. I 
am really glad to see that there are public interest exceptions 
here, and as iterations of this bill have developed over the 
years, these public interest exceptions have become more 
detailed. That is really gratifying. But the way this iteration 
of the bill has developed, the public interest exceptions have 
a strange sort of sliding scale for these exclusions.
    There are two sections of the bill that would address the 
public interest. One would address potential serious harms to 
the public interest, and another would address violations that 
present a danger to public health and safety.
    So when we focus on these two, it really looks like a 
sliding scale. If a violation has the potential to cause harm 
that isn't serious harm to the public interest, public interest 
being broadly construed I presume to mean the public health and 
safety but also ecological harms, consumer pocketbook harms and 
so on. For these potentials to cause harm to the public 
interest, there is a 6-month safe harbor for the first time 
violation. If there is a potential to cause serious harm to the 
public interest, there is no safe harbor.
    But if a violation presents an actual danger to this more 
narrow class of public health or safety, there is this optional 
24 hour safe harbor for first-time violations. I think that 
these incentives just seem really misaligned. There is sort of 
a sliding scale that slides backward in a way that would need 
to be addressed.
    But I think that really, the positive way to go is the way 
to go that I want to recommend the subcommittee focus on. I 
don't think those options have been exhausted yet. We heard a 
lot about compliance assistance, and it is absolutely true: 
small businesses don't have the resources that their larger 
competitors have to stay on top of all the requirements and to 
make sure that they are fully complying with their obligations 
under the law. So I think that the answer there is to provide 
small businesses that additional resource through compliance 
assistance offices. There have been bills that have been 
introduced in both the House and the Senate to provide these 
compliance assistance offices in every district of the country. 
There are other options that I have mentioned in my prepared 
statement.
    I see that my time is up, so I look forward to your 
questions.
    [The prepared statement of Mr. Shull follows:]

    [GRAPHIC] [TIFF OMITTED] T5345.031
    
    [GRAPHIC] [TIFF OMITTED] T5345.032
    
    [GRAPHIC] [TIFF OMITTED] T5345.033
    
    [GRAPHIC] [TIFF OMITTED] T5345.034
    
    [GRAPHIC] [TIFF OMITTED] T5345.035
    
    [GRAPHIC] [TIFF OMITTED] T5345.036
    
    [GRAPHIC] [TIFF OMITTED] T5345.037
    
    [GRAPHIC] [TIFF OMITTED] T5345.038
    
    [GRAPHIC] [TIFF OMITTED] T5345.039
    
    Mrs. Miller. Thank you very much.
    We certainly appreciate all the panelists and I think I 
would like to direct a question to Mr. Wordsworth, since you 
really are the only small business person on the panel that is 
working every single day in a small business and trying to 
understand and to comply. I am certain you are trying your 
darndest to comply with every piece of legislation and all the 
rules and regulations and etc. at every level of Government, 
the Federal level and the State level and sometimes the local 
level can even be worse than the Federal level, if that is even 
possible. But having come from a local level, I know how that 
can be as well, with various kinds of things that you have to 
comply with as well.
    Would you just tell us generally how many hours a week you 
actually spend working at your business and in the context of 
that, how much time would you guesstimate you spend during your 
average work week, maybe a percentage of your time, just trying 
to comply with the various things that you have to comply with? 
And as sort of an addendum to that, I know you have been at it 
for many, many years, but maybe in the last 10 years, have you 
seen a huge escalation in the amount of regulatory burden and 
the amount of time you are spending for compliance? I guess 
just generally, how much time do you spend complying and are 
you seeing it get better or worse?
    Mr. Wordsworth. First of all, my beginning experience was 
with a large corporation before I started my own small business 
in 1974. So I have had a period of time to accumulate some 
experience. I am learning every day now.
    Both my wife and I work 80 hours a week, maybe, 80, 85 
hours a week in our businesses 7 days. And we have a number of 
managers, but that is the life of the restaurant business. Of 
that time, I would say a good 15 percent maybe is spent, and 
maybe even more, in complying. You are so right when you say, 
these are Federal regulations in this book. I really invite you 
to entertain yourself by looking at this list. And you 
understand, these aren't the forms, these are just the names of 
the forms. The Chamber did an excellent job putting this 
together. This should get some kind of award.
    But many times, the State forms and the local forms are as 
burdensome. In particular, in some jurisdictions we have meals 
taxes. And almost the accounting meals taxes and the 
repercussions for a meal, for properly filing a meals tax in 
many cases is almost more impactful than filing a State sales 
tax. And so most people don't have the great opportunity to see 
the accumulation. No single item will ever kill you. But it is 
the great accumulation and that is what we deal with. We are 
the last guy, the total, the sum total. And it is the 
accumulation of the regulations. I think many of them, I truly 
believe, have unintended consequences. I don't think 
legislators really intended the consequence that it is on small 
business to comply.
    Mrs. Miller. Thank you. Death by 1,000 paper cuts, I 
suppose, is a way to say it as well.
    Ms. Harned, if I could ask you, one of the, actually this 
subcommittee has had a number of different hearings about 
burden. We have really tried to analyze the construct of some 
of the modeling that goes on with the various agencies about, 
as they are trying to estimate burden, cost of compliance and 
the amount of hours that people spend to try to comply with a 
number of the different regulatory processes that they are 
looking at.
    I am just wondering, from your experience, through your 
foundation there, and you were talking about the lady that was 
in the business with the leaded glass and the EPA regulations. 
I think you mentioned 90 some hours, I forget exactly what you 
said, less than 100, that they thought that had estimated for 
her to comply with that. Do you think that is a proper 
estimation of time, or have you found in your experience that 
agencies often lowball the amount of burden or cost of 
compliance, or do you think they are usually generally on the 
mark?
    Ms. Harned. It varies by agencies. Unfortunately, all I 
would really have to proffer there is anecdotal. But I think 
really the answer to your question goes to the point that Mr. 
Wordsworth just made, which is, each agency looks at the 
regulatory obligations they put on small business owners and 
the regulated community in a vacuum. I sat in a 2-hour meeting 
with some officials from EPA that went through just one section 
of one rule. I just sat there, just thinking, if I am a small 
business owner, they said this is no big deal, this will only 
take X amount of hours. But they are not thinking about all the 
other forums that Mr. Wordsworth has to comply with.
    So again, anecdotally we hear, this is a top 10 issue for 
small business owners, so I do think that there is probably 
something there to your point as far as agencies, what they are 
estimating what is actually happening out there. But that being 
said, I think the bigger problem is that each agency is looking 
at the regulatory obligations they are imposing and the 
paperwork requirements they are putting forward in a vacuum, 
and they are not seeing, as you said, the death by 1,000 paper 
cuts. As a result, that is really where I think small business 
owners like Mr. Wordsworth get buried.
    Mrs. Miller. And a final question for Mr. Shull. Mr. Shull, 
I was interested in your articulating repeat offenders. I have 
to tell you the truth, whenever I think of repeat offenders, I 
think of a piece of legislation I was involved with as a former 
Secretary of State of Michigan, where I was the chairman of the 
traffic safety commission of our State and we were looking at 
drunk driving repeat offenders. It was an interesting type of a 
thing. I don't think it is particularly inherent to drunk 
driving offenses, where somebody might have an extra glass of 
wine or something, and they go out, and one time in their life 
they have an incident, as opposed to a very small percentage of 
the driving population who are the repeat offenders that have 
an inordinate amount of the problems out there. They just 
flaunt the laws, they don't care about the laws. It is not like 
it happened once, OK, it can never happen really. But I think 
it is a different kind of thing.
    Obviously, as I say, I think the standard always has to be 
reasonable. And what is reasonable, there is often a lot of 
discussion on that. But I also think you could put it in the 
context, and I would ask your opinion on this, as a Member of 
Congress, this is just my second term here, but we have to fill 
out a lot of different paperwork, forms, etc., for trips that 
might be taken or different kinds of things that we are doing 
with our budget, budgetary constraints. I am a big believer of 
full transparency, etc. We try to make sure we are filling out 
all the forms that we can. We have taken lessons from the 
ethics committees and we understand what it is that they are 
looking for. And when we fill out our financial disclosure 
forms, we try and make sure we give them all the information 
they want.
    But if in advertently we somehow made a mistake and didn't 
give them all the information that they want, I guess I would 
just say, if it is OK for Congress, it is OK for us, how about 
these small businesses that it happens to them one time? I 
think, if I understand your testimony, too bad. It is OK for us 
to get away with it but not for a small businesses. There can 
never be an exception to the rule.
    I think of it as the Government sort of saying, do as I 
say, not as I do. What is your thought on that?
    Mr. Shull. Sure. Actually, I think there is a line in my 
prepared statement where I do note that agencies already have 
enormous discretion that they do exercise to waive off certain 
first-time or technical violations. Although I am sure in your 
case, any little slip-up will be noticed by your opponents and 
you will be roundly criticized for it. So I am sure you are not 
even getting off scot-free.
    But I do think there is a positive alternative. I just want 
to sort of take this example as another opportunity to point 
another kind of positive alternative. I am sure it would be a 
small chunk of time would be taken off Form A, Form B, Form C 
and so on that cumulatively would make a difference. If 
something so simple as having to fill out your name and your 
office number and your address, if you could do that once and 
every other form that you sit down to fill out, it were 
automatically completed for you.
    I think that there are ways, by shifting to electronic 
reporting and by giving small business key identifiers that 
they can take to all their forms. There are things like that 
make it easier for businesses to report the things that they 
have to report or disclose the things that they have to 
disclose without having to--but it would give them a way to 
spend a little bit less time doing that.
    I think that is something that would help small businesses 
and still allow the public to receive the information that it 
needs. So I think that is another example of the kind of 
positive way to go that doesn't reduce the information we 
receive and it gives small businesses a special break.
    Mrs. Miller. I appreciate those comments. I think that 
would be optimal in a perfect world. But in a Government that 
sometimes can't get the CIA and FBI to talk to one another, I 
am not sure that we are going to be able to accommodate that. 
But perhaps. It is certainly a goal.
    At this time I would yield to recognize Representative 
Neugebauer again, who is the author of this very interesting 
legislation, for questions.
    Mr. Neugebauer. Thank you, Madam Chairman.
    Mr. Shull, I want to go back to the comment you made, 
because I think sometimes, as I have listened to your 
testimony, I don't disagree, but I think you are talking about 
a different issue in many cases. What you are talking about is 
someone that has, shortening the time for paperwork. I think 
everybody on this dais would be for that.
    What we are talking about is not people, how long it took 
people to fill out that form. What we are talking about is if 
you forgot to fill out that form. So what this bill does is it 
addresses those people that didn't have, didn't say, it is too 
long a form, I am not going to fill it out, it is for those 
folks who thought that was a yearly report and it turns out it 
was a quarterly report.
    So we are talking about people that inadvertently--then 
when you talk about violations, I think we have to be talking 
about, a violation, for example, of a failure to report an 
accident on your job site. This bill doesn't give you 6 months 
to correct that violation on your job. It just says, if you 
forgot to fill out the appropriate report when someone got hurt 
on your job, and the administrator believes that the failure to 
fill out that report did not cause significant health or hazard 
to the employee, that there is a forbearance. If there was a 
serious violation on that job site, and you didn't report it, 
you don't get any help under this bill.
    So certainly, everybody here thinks we ought to cut down on 
the number of forms. And as Mr. Wordsworth pointed out with his 
document, and the fact that you print out the instructions, 
there are a lot of forms, I think everybody agrees with that. 
What we are talking about is that, like we are talking about 
Lori, and Lori writes me and says, Congressman Neugebauer, and 
I am paraphrasing here, my husband and I have a small business. 
My responsibility is to do the paperwork. She said, I am so 
afraid that we are going to forget to fill out a form or we 
don't fill it out correctly, and that we might be charged a 
huge fine or a penalty for that. We have a very small business 
and we can't afford that fine for something we didn't intend to 
do.
    So what this bill does is say to Lori and her husband, you 
know what, we understand that you are trying to comply with the 
law. Now, for those people that have serious violations, this 
bill, as I said earlier, I think that the Chairwoman pointed 
that out, it is not for those folks. We all want to work to 
reduce the paper volume. But we need to, as the Chairwoman 
said, if I get a break to get a second chance to fill out my 
form because I didn't check that box and should have checked 
that box, Lori and her husband ought to get a second chance, 
too.
    Mr. Shull. Yes, sir. And I believe that in many cases Lori 
and her husband might already be getting second chances. 
Because agencies do have discretion in some cases to waive 
fines. And there are times when they will choose not to, either 
because of the public interest hazard that is at stake or 
because immediate compliance is the essence of the requirement. 
For example, with the SEC and Y2K compliance, waiting until 
after Y2K wouldn't have really helped things. So immediate 
compliance was absolutely a necessity.
    I am pleased to hear that there is some interest in carving 
out some room for the public interest. There are some other 
public interest issues, though, that haven't been accommodated 
here that I do want to point out. One of them is that what 
might look like at the time a minor violation that doesn't seem 
to cause a harm to the public could ultimately, however, be 
something that contributes to early warning about hazards that 
are emerging. We might be getting that early warning if an 
instance here and an instance there that are not being 
reported. They are really sort of enormously complicated 
issues. I think because we haven't exhausted all of the other 
ways to help small businesses comply, I think this kind of 
extraordinary remedy of giving people, letting people off the 
hook for having failed to comply, this should be sort of the 
last resort.
    I think the first resort really should be helping small 
businesses comply. For example, small business compliance 
assistance. There are two bills right now, I believe it's H.R. 
230 and S. 1411. These are bills that would help establish 
small business compliance assistance programs, so that Lori 
would never have to worry about missing out or failing to do 
something correctly. She could go and get help to do it right. 
Because I am sure that Lori and all her colleagues in the small 
business community want to be good corporate citizens. They 
want to provide the public or their employees the information 
that they need to provide.
    And I really think that the first way to go about it is to 
help them do that. Help them with the burden before eliminating 
the information that the public needs.
    Mr. Neugebauer. If we really want to help them, we need to 
cut that folder in about ten-fold. That would really help them, 
because quite honestly, what we have done over the years is we 
have tried to somehow think that writing a report or filing 
some kind of form is going to somehow make the world a better 
place. I will tell you that probably when we start boiling a 
lot of that down, somewhere in a piece of compromise 
legislation was, well, let's just have them fill out a report. 
That is the kind of problem that is systemic in creating a 
business community in America that is not competitive.
    That is the reason that companies start to say, you know, 
it is easier to do business in Ireland or it is easier to do 
business in China or it is easier to do business in India or it 
is easier to do business offshore than it is in America, 
because we have taken this viewpoint that if we burden business 
enough or try to make everybody play by the rules and create an 
enormous number of rules that somehow things are better. And 
quite honestly, that is not the mentality that works for this 
country. It doesn't create jobs, it doesn't create opportunity. 
In fact, it creates an opportunity for liability because it 
causes people not to invest.
    That is the reason I want to take my next question to Mr. 
Wordsworth, have you ever found yourself sitting down with your 
attorney and saying, how can we structure this little business 
venture so that if we have some kind of a huge fine or a 
liability arises that we can protect our other assets and our 
other businesses?
    Mr. Wordsworth. That would be a luxury, a pure luxury to 
have the time to calculate a risk. I think in most cases, just 
by living the business, you live a calculated risk. I think Mr. 
Shull's word here is correct, exhausted. You really get 
exhausted under the burden of these.
    I don't think, as I understand this bill, this is not for 
the removal of any form whatsoever. I think this is for amnesty 
on a one-time occasion for a negligence that was unintended, a 
paperwork negligence. I think that is the intent of the bill, 
and I think it is misunderstood.
    Mr. Neugebauer. Madam Chairwoman, thank you for allowing a 
hearing on this bill, and I look forward to working with you 
and helping continue. I know you are a great champion of small 
business. I know you understand the importance of what they 
contribute to our country. I look forward to working with you 
on this. I want to also thank our panel today for their 
attendance.
    Mrs. Miller. Thank you very much, and I would echo that and 
thank our panelists very, very much. We are delighted to have 
you all, again in some cases, and look forward to continuing to 
work with you all in a bipartisan spirit to make sure that 
American businesses prosper and succeed in this global 
marketplace. Thank you very, very much for coming.
    [Whereupon, at 3:25 p.m., the subcommittee was adjourned.]

                                 
