Walter Russel mead writes in The American Interest, Beyond Blue 5: Jobs, Jobs, Jobs, 2/20/12:
Currently, the American legal and regulatory system is set up to bind as many people to employers as possible. The government wants you to be a wage slave and sets up a regulatory framework that keeps as many of us as possible yoked to bosses and management. The IRS doesn’t like the self-employed, fearing they many conceal income. Banks and credit card companies view such people with suspicion, and it is notoriously difficult for start ups and part time enterprises to have access to formal finance. Many services are hard for the self-employed to get on terms like those made available to employees of large corporations: from health insurance to retirement planning, many things are harder and more expensive for the self-employed. The payroll tax system is brutal: the self-employed pay both the employer and employee halves of Social Security and Medicare taxes, almost 20 percent of income and likely to go higher. Many cities will tack on unincorporated business taxes, mass transit taxes, and other interesting feudal exactions and dues.
Government aids established interests and is slow to accommodate to such seismic shifts. Regulations are often promoted by established business to protect them from the encroachment of entrepreneurs. I have personally seen many people start their own business with high hopes but little understanding of the burdens they face. Their first shock is paying both sides of the Social Security bill, but the marginal tax rates and other friction costs for the high risk involved quite often has them quitting after a few years when the risk/ reward becomes clear and unworthy of the effort.
We can measure the businesses that have closed due to such pressure, but the real loss is measurable; it is the business that is never started because of these obstacles.