Government policies and practices, such as tax rates and regulations, play a significant role in small business success. According to an analysis of 29 major government imposed or related costs affecting small businesses and entrepreneurs, here are the 15 friendliest states: South Dakota, Nevada, Wyoming, Alabama, Washington, Florida, Mississippi, Colorado, Texas, Michigan, South Carolina, Indiana, Tennessee, Virginia and Arizona.
The 15 that are least friendly to small business are West Virginia, Ohio, Oregon, North Carolina, Iowa, Vermont, Massachusetts, Hawaii, New York, Minnesota, Maine, Rhode Island, California, New Jersey, and at the very bottom, the District of Columbia.
This is according to the, "Small Business Survival Index 2006," which is the Small Business & Entrepreneurship Council's (SBE) 11th annual ranking of the states, according to their public policy climates for small business and entrepreneurship.
"In politics, talk is cheap, and everybody talks about how much they love small business," says Raymond J. Keating, SBE Council chief economist and author of the study. The index, "Moves past the rhetoric to actually rank the states according to the policies implemented in terms of taxes, regulation, spending, and other governmental costs affecting the entrepreneurial sector of our economy," he says.
The measures included in the Index touch small businesses of all types. This year's analysis includes three new measures: two government spending indicators and one looking at how the states protect private property. Small business owners are concerned about the size and growth of government, which, for example, directly affects current and future taxes, according to Karen Kerrigan, president and chief executive officer of SBE Council. "Government's first duty is to protect private property, but as we have seen with the U.S. Supreme Court's infamous Kelo decision, small businesses and homeowners are at risk of government taking, rather than protecting, property," she notes.
The 29 measures are added together to compute an overall rating for each state. The Index provides comparisons of states' tax, spending, regulatory, and litigation burdens. "Economic common sense and a large body of economic literature show that these policies matter to entrepreneurs, businesses, employees, and to the overall economic well being of each state," according to Keating.
"It needs to be recognized that countless issues play into human decision making. But governmental costs among the states will have an impact on where people live, work and start up businesses," he says. "For example, from 2000 to 2005, the top 25 states on the Small Business Survival Index netted a 2.14 million increase in population at the expense of the bottom 25 states."
"It also should not be surprising that job growth has come much faster in the states in the top half versus those in the bottom half of the Index," he adds. "From July 2003 to July 2006, for example, job growth registered an average of 5.3 percent in the top 25 states in the Index, compared with 3.4 percent in the bottom 25. That means that the rate of job creation was 71 percent faster in the top 25 states versus the lower 25 states and DC."
SBE Council is a nonpartisan, nonprofit small business advocacy group headquartered in Washington, DC. For a copy of the full index, visit http://www.sbecouncil.org or call 202-785-0238.
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