By TIM RONALDSON | Business Trends
New Jersey has geographic advantages in the business world.
It is located near two major cities, providing sprawling suburbs for people to live. It has multiple major ports, providing diversified commerce. It has more than 8.5 million residents, providing a vast array of potential employees.
But despite those facts, those advantages that many other states don’t have, the state is scaring businesses away with its unfriendly climate. New Jersey was ranked as the least friendliest state to small businesses, according to a recent study released by the Small Business & Entrepreneurship Council, ahead of only Washington, D.C., which was also included in the study.
The Small Business Survival Index, the SBEC’s 14th annual survey, covers 36 government-imposed or government-related costs affecting investment, entrepreneurship and business. Some of the areas include taxes on businesses and business owners, health-care regulations, costs such as electricity and workers’ compensation, and other regulations.
“(The report) illustrates New Jersey’s standard history of high taxes. What we’re seeing now, when we have times of economic stress, those taxes rear their head a lot higher and put a lot of pressure on business owners to seriously contract in the entrepreneurial spirit,” said Chris Brown, a Burlington County freeholder and former deputy-mayor of Evesham Township. “This report is not a single blip on the map. This has been historic in New Jersey. The pressure to perform under this tax system is much more rigid. You don’t have room for a mistake when you open up a business in New Jersey.”
New Jersey ranked near the bottom in almost every statistical category related to taxes, according to the report. It ranked 49th in personal income tax rates, 50th in individual capital gains tax rates, 45th in corporate income tax rates, 46th in corporate capital gains tax rates, and 49th in state and local property taxes.
“When you’re ranked (at these low positions), you’re just telling people ‘don’t come to this state.’ You’re putting out a sign that says ‘not open for business.’ It’s a very scary situation that we find ourselves in,” Brown said.
Brown believes the state has created a “machine” of overspending that needs to be fed all the time, and New Jersey politicians have for too long continued to throw money at problems instead of looking at what’s working and what’s not. There are too many layers of government – too many committees, too many school boards, too many municipalities – that weaken the impact of each additional dollar fed to the “machine.”
“Without a doubt, the biggest obstacle to entrepreneurship and investment is public policy gone awry. While most politicians talk a good game about entrepreneurs and small businesses, public policy too frequently raises costs, creates uncertainty and diminishes incentives for starting up, investing in and building a business,” reads the report, written by Raymond J. Keating, chief economist at the SBEC. “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.”
State policies, specifically in regard to tax structure, are out of whack and don’t allow for New Jersey’s entrepreneurial minds to flourish, Brown said. Health care has also become too expensive for small businesses, making it difficult for them to compete with big corporations for potential employees.
Brown described New Jersey’s business structure as a car, with the corporations as the exterior protection of the car and the small businesses as the interior engine that makes it run.
“(Small businesses) just don’t seem to ever get (their) due,” he said. “Businesses are doing the right things in New Jersey. The state is negating all those progresses. We have great human capital.”
Keating, of the SBEC, agreed, writing that the focus of economic growth should be on the private, not public sector.
“Government does not drive economic growth. Quite the contrary, growth comes from the private sector,” Keating wrote. “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 works and what does not, the entrepreneurs, innovators and investors will invest the capital – including sweat equity – and offer the ideas that launch and build businesses, create new jobs and grow the economy.”
Brown said the No. 1 thing that Gov.-elect Christie has to assess is the cost of government and its role in relation to business growth and sustainability.
“Any change that occurs has to take time. It can’t be too quick, because it won’t last,” Brown said. “You have to set yourself up for the future.”
Mon, Dec 28, 2009 at 1:03 pm
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