According to SBSC chief economist Raymond J. Keating, author of the study, “The ‘Small Business Survival Index 2003’ compares how governments in the states treat small businesses and entrepreneurs. Since small business serves as the backbone of the U.S. economy — for example, by providing the bulk of new jobs and being a font of innovation — every state and local lawmaker should be concerned with how their policies impact small business.”

SBSC president Darrell McKigney stated, “The purpose of the ‘Small Business Survival Index 2003’ is to let business owners, citizens, and lawmakers know how they stack up with the rest of the country in terms of how friendly government policies are toward small businesses and economic growth.”

The index ties together 21 government-imposed or government-related costs affecting small businesses: personal income taxes; capital gains taxes; corporate income taxes; individual alternative minimum taxes; corporate alternative minimum taxes; indexing of personal income tax rates; property taxes; sales, gross receipts, and excise taxes; estate taxes; unemployment taxes; health care costs; electricity costs; workers’ compensation costs; crime rates; right-to-work status; number of bureaucrats; tax limitation status; Internet taxes; gas taxes; state minimum wages; and state legal liability costs. These measures are combined into one index number.

According to the index, the states most friendly to small business are: 1) South Dakota, 2) Nevada, 3) Wyoming, 4) New Hampshire, 5) Florida, 6) Texas, 7) Tennessee, 8) Washington, 9) Michigan, 10) Mississippi, 11) Alabama, 12) Colorado, 13) Illinois, 14) Virginia, and 15) Indiana. On the other hand, the states least friendly to small business are: 37) North Carolina, 38) Montana, 39) Ohio, 40) West Virginia, 41) Iowa, 42) Oregon, 43) New Mexico, 44) Vermont, 45) New York, 46) California, 47) Rhode Island, 48) Maine, 49) Minnesota, 50) Hawaii, and 51) District of Columbia.

Keating concluded, “The best policy environment for entrepreneurship consists of low taxes, limited government, restrained regulation, and government protecting life, limb, and property. States following such a governing philosophy will reap great rewards from America’s entrepreneurs, including faster economic growth and increased job creation.”

Publication date: 09/29/2003