Stifling Small Business

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The New York Sun

Anyone still wondering why job growth in the Empire State is lagging the national average need look no further than a survey published yesterday by the Small Business and Entrepreneurship Council. New York ranks an embarrassing 44th in the nation in a comparison of small-business-friendly policies on the Washington-based council’s Small Business Survival Index 2005. New Yorkers would be better off setting up shop in South Dakota, Nevada, or Wyoming, the top three on the list. Wal-Mart isn’t the only employer feeling unwelcome in New York.


The group’s index examines a range of government policies that directly affect entrepreneurs who want to open, or already operate, a small business. The index includes 26 measures of such policies, focusing on areas like taxation, health care costs, energy prices, and the regulatory burden. New York is mediocre – at best – along almost every parameter.


New York’s infamous tax burden is again a major culprit. The council’s chief economist and author of the report, Raymond Keating, ticks off a long list of taxes holding back the state, from high personal and corporate income tax rates to the capital gains tax to property taxes to individual and corporate alternative minimum taxes to the state death tax to some of the highest gas taxes in the country. All those taxes support 6.16 full-time state and local bureaucrats for every 100 New Yorkers, compared to 4.13 in Nevada, the most bureaucrat-free state, and 5.65 in South Dakota, the top pro-small-business state overall.


The report also highlights other business problems. New Yorkers pay 59% more than the national average per kilowatt hour for electricity. New York mandates community rating in setting health insurance premiums, so everyone pays the same premium no matter their health risks, a practice that contributes to higher costs. And this report doesn’t even account for costs related to the state’s stubbornly unreformed tort system.


The federal government defines a small business as a firm with fewer than 500 employees. The council notes that by this measure, 99.9% of the 24.7 million businesses in America in 2004 were small businesses, and they accounted for half of private-sector payrolls and more than half of non-farm private gross domestic product. The New York director of the National Federation of Independent Business, Mark Alesse, notes that nine out of 10 new jobs in the state are created by small businesses. That statistic and the council’s index are important facts for lawmakers in Albany to mark.


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