Barbara’s Blog

Where your business is located can greatly affect your operations, after-tax income, workforce, and more. The climate for small businesses varies greatly from state to state. The Small Business & Entrepreneurship Council has released its 16th Annual Small Business Survival Index and the results are very telling.

The 2011 Index has been expanded to cover 44 major government-imposed or government-related costs affecting small businesses and entrepreneurs. These include personal and corporate tax rates, health care mandates, utility costs, workers’ compensation costs, the crime rate, right-to-work law, and state and local spending benefiting small businesses. These and other measures are added together for an overall rating.

• The top 10 states most friendly to small businesses are: 1st) South Dakota, 2nd) Nevada, 3rd) Texas, 4th) Wyoming, 5th) South Carolina, 6th) Alabama, 7th) Ohio, 8th) Florida, 9th) Colorado, and 10th) Virginia.
• The bottom 10 jurisdictions that are the least friendly to small businesses are: 42nd) Massachusetts, 43rd) Minnesota, 44th) Connecticut, 45th) Maine, 46th) California, 47th) Rhode Island, 48th) Vermont, 49th) New Jersey, 50th) New York and 51st) District of Columbia.

Wouldn’t it be great if our state and local government representatives read the survey and worked to improve their state’s ranking? Unfortunately, this is not likely to happen, especially in the states down on the list:

• Gov. Cuomo of New York, the state in last place in the survey (followed only by Washington DC), has announced plans to call for comprehensive tax reform that includes a hike in the personal tax rates for wealthy individuals. Many of these so-called wealthy individuals are small businesses trying to generate jobs and stay in business; the tax hike will have an adverse impact on both of these goals and help New York retain its claim to last place (other than DC) in next year’s survey.
• Gov. Christie of New Jersey announced that he wants to cut tax rates but faces serious opposition in this effort. A Quinnipiac University poll of registered voters shows that 64% favor a tax hike on millionaires.

Come next November, when elections will affect the makeup of many state and local governments, there could be dramatic changes in some locations. The lesson from the Small Business Survival Index is that small business owners must be involved in politics at the state and local levels to ensure that their governments adopt or expand policies that create a business-friendly climate.

As states and municipalities scramble to find revenue in this tough economy, many are looking to small businesses to pay a greater share of tax revenues. For example, NY’s proposed budget would apply a range of new taxes to various items; the higher taxes could greatly depress the sales of products and services offered by convenience stores, clothing boutiques and other small businesses.

If small businesses are to be the saviors in this economy—hopefully creating new jobs as they have traditionally done and leading the way to increased consumer confidence—then piling on taxes on the very things that these businesses sell may raise some revenue in the short term but won’t help the situation in the long run.

Small businesses can check the impact of state taxes, utility costs, workers compensation, trends in state and local government spending, and other matters by viewing the 13th annual Small Business Survival Index.