Voices of Small Business: Discussion and Policy Implications

These are the key findings in this paper, which analyzes feedback from small business owners about the ease of doing business in their state.

‘Voices of Small Business: Discussion and Policy Implications” focuses on responses to an open-ended question in a survey conducted in late 2011 by Thumbtack.com, an online platform for service providers to connect with customers, in collaboration with the Kauffman Foundation.

The survey itself gathered data from a large sample of 6,730 newly registered professionals concerning the ease of doing business in their respective states. The “Voices” report examined 2,463 respondents’ answers to the open-ended question that asked, “Please let us know any experiences or thoughts you have regarding the ease of doing business in your state.” The analysis revealed three major areas of interest for small business owners: taxation, licensing and regulation, and employment.

Around half of the 15.5 percent who mentioned taxes described the taxes in their state as “high.” Other respondents complained about various taxes, from sales to franchise to corporate income, but also about the complexity of the tax codes and, in some states, the absence of clear, accessible tax information and payment systems. Of those respondents with positive feelings about their states’ tax environments, ease of obtaining tax code information and making payments online were among the reasons for their satisfaction.

The clarity and enforcement of state and local business regulations and licensing requirements – or lack thereof – also affected respondents’ perceptions of state business friendliness. Fully 28.9 percent of those who answered the open-ended question mentioned regulation or licensing, with 75.1 percent expressing negative viewpoints. A common theme was not that regulations were too onerous, but that the layers of regulation – city, county, state and others – made business operations, and sometimes hiring, difficult.

Based on the analyzed data, the paper offers policy recommendations for states seeking to create a business-friendly environment, including:

• Consider simplifying tax codes, especially sales tax codes, and creating more uniformity among local, county and state policies.
• Implement easily understood online systems with clear information on the tax code and a mechanism to manage and pay business taxes via the Internet.
• Make compliance with regulation easier by pushing for conformity among municipal, county and statewide regulation. License or permission requirements by multiple cities and counties will be cumbersome to businesses, and states can help reduce this burden.
• Establish a single, easily understood website where individuals can establish a business and see all relevant regulatory policies for their establishment.
• Evaluate licensing regimes and enforcement. If licensing is vital to provide quality assurance, states should enforce it. If states cannot enforce it, they should disregard such licensing schemes, as they hurt competition.