Would Your Governor Sign Your State’s Small Biz Report Card?

512px-Report_CardThe smiles in Texas must be stretching from Stetson to Stetson. The San Antonio Spurs made mincemeat of Miami and their state gets an “A+” rating in the third annual Thumbtack and Ewing Marion Kauffman Foundation survey of small business friendliness.

Other “A+”-rated states in the survey are Idaho, Utah and Virginia. Colorado, Oklahoma, Tennessee and Louisiana grabbed “A” ratings. On the other end of the scale, small biz owners handed out failing grades to California, Rhode Island and Illinois. More specifically, the cities of Sacramento, Providence and Buffalo received the worst marks from those surveyed.

While there was some movement between earlier surveys, most of the highest and lowest performing states seem to have a lock on their positions. Texas, Utah and Idaho have been among the top five every year of the survey, while California and Rhode Island have been bottom five cellar dwellers each year.

Taxes vs regulations

Although the highest ranking states are generally among the lowest taxing states—and the converse is true for the most poorly ranked states—regulatory compliance issues are a bigger driving force when it comes to final rankings. Fully two-thirds of all respondents feel they pay their “fair share” of their state’s tax burden. It’s licensing requirements and the hassle of filing taxes that get under the skin of small business owners.

Have you seen the TV ad blitz that declares “New York State (is) Open for Business”? You probably have. The last time I saw a figure, Gov. Andrew Cuomo was spending $140 million on the campaign. Melissa DeRosa, a spokeswoman for the governor, told the NY Times that “we are doing everything we can to level the playing field to bring businesses and jobs to the state of New York.”

The commercials and “The New NY” campaign tout tax-free zones, funding assistance, help finding resources, export tools and more. The program’s website offers a lot of information. However, despite this high profile effort, New York has only bumped up from a “D” grade in 2012 to a “D-plus” in 2014. There is one more point I want to note about New York; although it sports an overall low rating, it gets an “A-minus” for “training and networking.”

The fundamentals

I’m detailing what’s happening in New York for a specific reason: It’s not short-term government programs that create a positive climate for small businesses, it’s the long-term policies, approaches and infrastructure that make a place good for business. Politicians at all levels campaign on the promise to enact special programs to “create jobs,” but they are virtually worthless to an area’s long-term economic health.

The key is to establish policies that make it easy to do business and then get out of the way—stop messing with things. That way the requirements of doing business are understood and predictable from year to year.

So here’s some advice to New York and the other low-ranked states. Model yourself after Texas, Idaho, Utah and Virginia and then stand back and see what happens.

Can you imagine how small businesses could transform this country if all 50 states received “A” grades?

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