New Jersey Ranks Last – Again – in Business-Friendly Climate
Posted December 12, 2008

Even as Governor Corzine last month signed legislation aimed at “encourag[ing] entrepreneurial firms” in New Jersey, a study released this month by the Virginia-based Small Business and Entrepreneurship Council (SBE Council) shows New Jersey again ranked very last of the 50 states in “friendly policy environments for entrepreneurs.”

Now in its 13th year, the Small Business Survival Index scores the states and Washington, D.C. “according to some of the major government-imposed or government-related costs affecting investment, entrepreneurship, and business.” This year’s study evaluated 34 costs that affect small businesses and entrepreneurs – including costs related to personal and corporate income taxes; individual and corporate capital gains taxes; individual and corporate alternative minimum taxes; property taxes; sales, gross receipts, and excise taxes; death taxes; unemployment tax rates; health savings accounts; health care regulations; electricity costs; workers’ compensation costs; crime rate; number of government employees; internet taxes; gas and diesel taxes; state minimum wage; trend in state and local government spending; per capita state and local government spending; protecting private property; highway cost efficiency, and paid family leave.

Based on these and additional factors, according to the Small Business Survival Index 2008: Ranking the Policy Environment for Entrepreneurship Across the Nation (press release and full text available from the SBE Council), the Garden State is among those states with “the most anti-entrepreneur policy environments.”

The following, taken from the Index, is worth noting:

The U.S. economy is in a serious downturn, and the outlook for a robust recovery seems remote. That means state and local policymakers face some very difficult decisions. Depending on which direction state lawmakers choose, they can either make the economic situation in their own state better or far worse.
           
… And even though so-called economic stimulus measures like tax rebate checks, and more federal spending on unemployment benefits, food stamps, infrastructure and aid to states and localities do nothing to boost the economy – arguably make matters worse – that seems to be the direction the federal government is looking for action on the economy. 

But the questions do not stop with federal policymakers, but extend to state and local policymakers. Due to year-after-year of excessive spending, when tough economic times hit, as is now the case, many state and local governments face huge and mounting budget deficits. Some states have passed or are proposing higher taxes in response. Various state lawmakers are buying into the bankrupt notion that more government is the answer, and are pushing additional government spending on, for example, infrastructure and corporate welfare….

In the end, government is not the source of economic growth. Quite the contrary, growth comes from the private sector. The more resources that government sucks up – whether through taxes or borrowing – the fewer resources left for more productive uses in the private sector. The ultimate source of growth is economic risk taking in the private sector, that is, investing and entrepreneurship. These crucial activities drive innovation, invention, efficiency and productivity in our economy. While consumers ultimately decide what flies and what does not, the entrepreneurs, innovators and investors will invest the capital – including sweat equity – and offer ideas that launch and build businesses, create new jobs, and grow the economy.

What often stands as the largest impediment to entrepreneurship and investment is public policy gone awry. While most politicians rhetorically embrace entrepreneurship and small business, the public policies they support too frequently raise costs, create uncertainty and diminish incentives for starting up, investing in and building a business. And again it’s not just elected officials at the federal level that cause problems. It certainly occurs at the state and local levels as well.

Yet, despite the fact that this is not New Jersey’s first trip to the bottom of the business pack – as last year’s Index also ranked the state 50 out of 50 – the current administration in Trenton persists in giving empty lip service to improving the business climate. Instead of enacting real property tax reform, truly slashing state spending, and making it easier for entrepreneurs to thrive in New Jersey, lawmakers have continued to skirt meaningful reform.

New Jersey cannot afford to remain stuck in last place if the state hopes to support and encourage existing small businesses – let alone spur new business growth.

It’s time for the legislative and executive branches to stop playing politics and start enacting meaningful pro-business economic policies.

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