The Washington Post

These states are stifling small businesses


States shaded blue didn’t get very good reviews from their small business owners. (Graphic courtesy of Kauffman Foundation / Thumbtack)

On opposite coasts and opposite ends of the size spectrum, California and Connecticut share at least this one thing in common — they’re both apparently stifling small businesses with red tape.

The Golden State and Nutmeg State were ranked by small business owners as having the most burdensome regulations in the country, according to a new survey by local services marketplace Thumbtack and entrepreneurship research group Kauffman Foundation.

“It is critical to the economic health of every city and state to create an entrepreneur-friendly environment,” Dane Stangler, vice president of research and policy at the Kauffman Foundation, wrote in the report, later adding that policy makers set their states up for long-term growth “by listening to the voices of small business owners themselves.”

It’s California’s third consecutive year receiving the lowest possible mark in terms of state regulatory burdens, while business owners downgraded Connecticut from a D grade last year to an F in 2014. No other state earned a failing grade in that category of the online survey, to which 12,632 business owners responded.

Specifically, California’s small employers expressed the most concern with the state’s environmental, health and labor regulations, giving their state a failing grade in each of those three subcategories. Connecticut earned the same low mark in those areas as well as for its licensing and zoning rules—that is, in every regulatory category on the survey.

Of course, red tape isn’t the only potential burden for employers.

On the tax policy front, small business owners handed out failing grades in Rhode Island, Illinois and — again — Connecticut. California eked out a D from employers with respect to its tax system.

In terms of the ease with which entrepreneurs can actually starting a new company, Connecticut this time earned the D, while California was joined by Illinois and Rhode Island as the only three states to warrant an F. Those latter three states also earned the only failing marks in survey’s overall measure of small-business friendliness.

So, thinking about relocating your company? Considering the results of the survey, employers should perhaps steer clear of those states in favor of a new home in Idaho, Texas, Oklahoma or Virginia—the four states that earned the highest possible reviews from small business owners.

Follow J.D. Harrison and On Small Business on Twitter.

J.D. Harrison covers startups, small business and entrepreneurship, with a focus on public policy, and he runs the On Small Business blog.
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