How Friendly Are the States Toward Entrepreneurship?

November 3, 2006; 02:28 AM
The Small Business & Entrepreneurship Council (SBE Council) has released its eleventh annual rankings of the states according to their public policy climates for small business and entrepreneurship in the "Small Business Survival Index 2006."

According to SBE Council chief economist Raymond J. Keating, author of the study, "In politics, talk is cheap, and everybody talks about how much they love small business. The 'Small Business Survival Index 2006' 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."

SBE Council CEO and President Karen Kerrigan added, "The 'Small Business Survival Index' is notable for its breadth. The measures included in the Index touch businesses of all types -- from the home-based consultant to the venture capitalist to technology companies to manufacturing firms. State policymakers need to pay attention for the sake of their own state's competitiveness and economy. On November 7, voters will be casting their ballots on many initiatives that impact the environment for business. From tax hikes to minimum wage increases, voters need to ask whether these measures will actually help or hurt in driving jobs, business opportunities, and investment to more business-friendly states."

Added to the "Small Business Survival Index" for 2006 are three new measures -- two government spending indicators and one looking at how the states protect private property. Kerrigan noted: "These additions to the Index are important and make sense. Small business owners are concerned about the size and growth of government, which, for example, directly affect current and future taxes. In addition, 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."

The Index analyzes 29 major government-imposed or government-related costs affecting small businesses and entrepreneurs. These measures are added together to compute an overall rating. The entire report is available at http://www.sbecouncil.org/. (Please look for the Index icon on the right side of the website's front page.)

Keating noted: "The 'Small Business Survival Index' allows states to be compared in terms of, for example, their tax, spending, regulatory, and litigation burdens. As explained in the study, economic common sense and a large body of economic literature show that these policies matter to entrepreneurs, businesses, employees and therefore, to the overall economic well-being of each state."

In terms of their policy environments, the most entrepreneur-friendly states under the "Small Business Survival Index 2006" are: 1) South Dakota, 2) Nevada, 3) Wyoming, 4) Alabama, 5) Washington, 6) Florida, 7) Mississippi, 8) Colorado, 9) Texas, 10) Michigan, 11) South Carolina, 12) Indiana, 13) Tennessee, 14) Virginia, and 15) Arizona. In contrast, the most anti- entrepreneur policy environments are offered by the following: 37) West Virginia, 38) Ohio, 39) Oregon, 40) North Carolina, 41) Iowa, 42) Vermont, 43) Massachusetts, 44) Hawaii, 45) New York, 46) Minnesota, 47) Maine, 48) Rhode Island, 49) California, 50) New Jersey and 51) District of Columbia. Complete rankings are found below.

Keating added: "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. 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 plus the District of Columbia. It also should not be surprising that job growth has come in much faster in the states in the top half versus those in the bottom half on the Index. From July 2003 to July 2006, for example, job growth registered 5.3% in the top 25 states in the Index, compared to 3.4% in the bottom 25 and the District of Columbia. That means that the rate of job creation was 71% faster in the top 25 states versus the lower 25 states and D.C."

For a copy of the "Small Business Survival Index 2006," visit SBE Council's website at www.sbecouncil.org. SBE Council can be contacted at 202-785-0238. SBE Council is a nonpartisan, nonprofit small business advocacy group headquartered in Washington, D.C. that works to protect small business and promote entrepreneurship.

Following are the complete state rankings for the "Small Business Survival Index 2006":

            Small Business Survival Index 2006: State Rankings

                     Rank    State              SBSI
                    1       South Dakota       26.360
                    2       Nevada             29.915
                    3       Wyoming            35.840
                    4       Alabama            40.328
                    5       Washington         40.420
                    6       Florida            40.819
                    7       Mississippi        41.088
                    8       Colorado           42.680
                    9       Texas              42.710
                    10      Michigan           42.742
                    11      South Carolina     44.558
                    12      Indiana            44.870
                    13      Tennessee          44.974
                    14      Virginia           45.456
                    15      Arizona            45.748
                    16      Pennsylvania       45.863
                    17      Alaska             46.770
                    18      New Hampshire      47.256
                    19      Delaware           47.310
                    20      Arkansas           48.158
                    21      Illinois           48.494
                    22      Missouri           49.242
                    23      Oklahoma           49.460
                    24      North Dakota       49.850
                    25      Georgia            49.903
                    26      Utah               50.095
                    27      Wisconsin          51.479
                    28      Maryland           51.845
                    29      New Mexico         52.510
                    30      Montana            53.898
                    31      Nebraska           54.220
                    32      Connecticut        54.250
                    33      Louisiana          54.270
                    34      Idaho              54.520
                    35      Kansas             54.800
                    36      Kentucky           56.265
                    37      West Virginia      56.660
                    38      Ohio               56.730
                    39      Oregon             57.059
                    40      North Carolina     57.482
                    41      Iowa               57.760
                    42      Vermont            59.480
                    43      Massachusetts      61.055
                    44      Hawaii             62.608
                    45      New York           62.654
                    46      Minnesota          63.590
                    47      Maine              63.993
                    48      Rhode Island       64.970
                    49      California         65.117
                    50      New Jersey         65.345
                    51      Dist. of Columbia  75.420