New York and New Jer sey are the worst states in America for starting up, building or running a business — with the Garden State ekeing out a “victory” as No. 50.
That grim news comes from the just-published “Small Business Survival Index 2010: Ranking the Policy Environment for Entrepreneurship Across the Nation,” this year’s version of an annual report I compile for the Small Business & Entrepreneurship Council.
The Index ranks the states according to 38 government-imposed or government-related costs that impact entrepreneurship, investment and the economy. (We also rank the District of Columbia, which does worse overall than any of the states, but it’s a special case.) The measures generally cover three major areas — taxes, regulations and government spending.
Alas, New York and New Jersey “excel” on just about every front:
They suffer from burdensome taxes across the board, including high personal income, individual capital gains, corporate income, corporate capital gains and property — plus taxes on fuel and on inheritances.
Along with those taxes, of course, go high levels of state and local government spending, and large numbers of state and local government employees.
Both states also impose legions of health-insurance mandates, raising premium costs. High costs for electricity hit businesses across the board. And for good measure, each allows for easy abuse of eminent domain, with small businesses often among the victims.
Not long ago, enterprise zones were the rage in policy circles. The idea was to reduce taxes and other governmental burdens in a particular area, in the hopes that businesses would set up shop, advance the economy, and create jobs. What we have in New York and New Jersey is one vast bi-state anti-enterprise zone.
While each state has some attractions for businesses, Empire and Garden State politicians have spent decades working to drown those merits with harmful public policies. The combination of overregulation, high taxes and big-government spending has worked to raise the costs of economic risk-taking and chase away opportunity.
Which also winds up chasing away people.
Consider the key statistic of “net domestic migration” — the movement of people between the states, that is, excluding births, deaths and international migration. From 2000 to 2009, New York exported a net 1.7 million people (or 9 percent of its 2000 population) to other states, and New Jersey 460,000 (or roughly 5 percent of the 2000 population).
That made New York the nation’s top exporter of people, and New Jersey No. 5 among the states.
Are there signs of hope? Well, Gov. Chris Christie understands that change is desperately needed in New Jersey. He has killed off the Corzine-era income-tax surcharges, begun the process of trying to rationalize regulation and taken on the public-sector labor unions. We’ll see if New York’s Gov.-elect Andrew Cuomo truly gets it, and if his
actions match his pro-
taxpayer, pro-economic-growth campaign rhetoric, when he takes office next month.
But make no mistake, a little tweaking here and there won’t make a real difference in either state. When things have gotten as bad as they are in both New York and New Jersey, nothing less than a radical shift away from big, intrusive government, and toward a limited-government, pro-growth tax and regulatory-policy regime, can turn things around.
Embracing economic common sense will require enormous political courage.
Raymond J. Keating, who lives on Long Island, is chief economist for the Small Business & Entre preneurship Council.