State policies play a big role in the success (or failure) of small businesses—or at least that’s what a recent U.S. Chamber of Commerce report suggests.
“Enterprising States 2013: Getting Down to Small Business” ranks all 50 U.S. states on more than 30 economic measures, including gross jobs growth, taxes, exports, college affordability, the number of organizations that promote innovation and small-business lending. (Check out a helpful interactive map.) The idea behind the project, now in its fourth year, is to show the importance of various state policies in fostering economic growth and small-business formation. “Governors and state and local government will drive the types of new, experimental, flexible job growth strategies that can match the speed of the global economy and achieve this growth imperative,” the report says. “Policymakers ignore small business at their own peril and that of the economy.”
So, which states have the most business-friendly policies? Utah, Texas, North Dakota and Washington all rank high in several of categories. Hovering near the bottom are states like California, New York and New Mexico, which ranked low on several categories. (New York ranked 50th for its “business climate,” which includes factors like state and local tax burden, legal climate and cost of living.)
The role that states play in fostering business growth and innovation has gotten more attention in recent years—though it’s still a controversial topic. Some economists argue that higher state taxes, for example, promote more stable economies that promote consumer spending. Economists with the Federal Reserve Bank of St. Louis argued in a 2005 paper that “passive policies,” those that require “little or no direct government intervention into the entrepreneurial process”—such as personal tax rates, bankruptcy law and the minimum wage--are more successful at fostering entrepreneurship than initiatives and tax breaks geared specifically at small businesses.
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