Business Opportunities Weblog

October 16, 2004 by Dane Carlson | 1 Comment

Raymond J. Keating of the Small Business & Entrepreneurship Council explains in this article why California gets such a low score on the Small Business Survival Index — and why it may soon be getting worse!

Each year, the Small Business & Entrepreneurship Council produces the Small Business Survival Index. The report ranks the states according to their respective policy climates for business and entrepreneurs. In the just-released 2004 edition, California does not rank last, but that’s only because the District of Columbia is included. Among the 50 states, California offers the most hostile policy environment for small business.

The negatives are quite numerous. For example, the state’s personal income and capital gains tax rates are among the highest in the nation, along with a burdensome corporate income tax. For good measure, unlike most other states, California slaps an additional tax on S Corporations. The state also imposes individual and corporate alternative minimum taxes that diminish the benefits of various tax incentives. In addition to these formidable tax woes, legal liability costs, workers’ compensation premiums and electricity costs rank among the most onerous.

Such an environment presents real obstacles to business formation, economic growth and job creation. The incentives clearly point to living, working, investing and building businesses elsewhere. In fact, from a policy perspective, any other state in the country would be friendlier.

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