Wednesday, September 24, 2014

Illinois Receives “F” in Survey on Small Business Friendliness

Looking to start a business? Stay in the South and West in states like Texas, Utah, and Colorado. Avoid Northeastern states like Rhode Island, Connecticut, and Pennsylvania. And God forbid starting a business in Illinois or California. At least that is the conclusion put forth in the third annual Small Business Friendliness Survey, conducted by the Kaufmann Foundation, a think tank, and, a website that helps businesses find customers. The report asked over 12,000 small business owners from across the country about the ease of starting a business, hiring and firing, complying with the local tax code, obtaining licenses, and complying with environmental and zoning regulations in their home state.

The small business owners gave their state a letter grade between A and F. Texas, Idaho, Utah, and Virginia received A+ grades. Illinois, California, and Rhode Island received an F. The friendliness of professional licensing requirements was the most important issue cited by small business owners in determining their grade, closely followed by the ease of filing taxes. Interestingly, tax rates were a less important factor than the ease of filing taxes. Small business owners aware of state programs to help businesses were more likely to say that their states were small business friendly than those who were unaware.

While the study is somewhat subjective, as it relies on the opinions of small business owners, local governments can learn important lessons nonetheless. First, keep rules simple. Eliminate unnecessary permits, and make it easy to obtain the necessary ones. Second, advertise programs that help small businesses. Small business owners are more likely to have a positive attitude toward government when they know that government is on their side. Third, instead of offering costly tax breaks, make it easy for small businesses to pay taxes. Small business owners prefer tax simplicity to low tax rates.

A climate that is small business friendly benefits everyone. It supports the local government by providing tax revenue. It supports the local community by providing local residents with jobs and reducing blight. And it supports consumers, who receive more choice and cheaper prices. Hopefully politicians in Springfield and Sacramento will learn this before it is too late.

Check out Ancel Glink’s resource center for more ways to promote economic development in your community.