PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

STATE OF THE WEEK: Ohio a Top Ten State, But a Potential Negative Looms on November Ballot

By at 20 July, 2017, 12:57 pm

by Raymond J. Keating-

Small Business Policy Index 2017: Ohio ranked 10th among the 50 states.

SBE Council’s “Small Business Policy Index 2017” ranks the 50 states according to 55 different policy measures, including a wide array of tax, regulatory and government spending and performance measurements.

Small Business Tax Index 2017: Ohio ranked 8th among the 50 states.

SBE Council’s “Small Business Tax Index 2017” ranks the states according to 26 different tax measures. Among the taxes included are income, capital gains, property, death, unemployment, and various consumption-based taxes, including state gas and diesel levies.

Over the past decade or so, Ohio and North Carolina are neck-and-neck as to which state has improved its policy climate the most for entrepreneurship, small business and investment. Indeed, on both the “Small Business Policy Index 2017” and the “Small Business Tax Index 2017,” Ohio now ranks as a top 10 state.

Not that long ago, many would have found such a ranking for the Buckeye State as being little more than a dream or fantasy. But Ohio serves as an excellent example of what can happen if state lawmakers purposefully decide to improve their state’s competitiveness by making it less costly to startup, operate and invest in a business. For example, the state corporate income tax and the state’s death tax have been eliminated, and the state personal income and capital gains tax rate has been reduced.

Looking ahead, if Ohio lawmakers stay focused on this kind of agenda, more improvement lies ahead, aiding economic, income and employment growth in the state.

Of course, every state, no matter how well they rank on SBE Council’s “Small Business Policy Index” and the “Small Business Tax Index,” has its challenges. One potential ill that has cropped up in Ohio is a measure on the November 2017 ballot.

A Threat to Small Business Costs

The “Ohio Drug Price Relief Act” might sound nice initially to many people, as it purports to require that state government pay no more for prescription drugs than the lowest price paid by the U.S. Department of Veterans Affairs (VA). However, myriad problems exist with such a government mandate, including, for example, additional costs due to a lack of information of VA drug prices, wiping out existing benefits negotiated by Ohio, increased governmental costs for taxpayers, potentially raising drug prices for those in private insurance plans, added taxpayer costs related to ballot-measure-related lawsuits, and potentially higher drug prices for veterans due to the threat of the VA losing its ability to get favorable prices. Indeed, the list of potential ills from this ballot measure is rather lengthy.

Among other problems is the issue of manufacturers being unwilling to negotiate with the state due to setting a precedent for other states. Indeed, this ballot measure is an effort to further expand government’s power to set prices for prescription drugs.

Price controls, of course, limit the potential returns of investing in the high-risk, high-cost effort of developing new and improved prescriptions drugs, medicines and treatments. If we want to see innovation, invention and investment continue to flourish in the area of life-saving and life-enhancing prescription drugs, then measures like this are demonstrably counter-productive.

And keep in mind, that most pharmaceutical and medicine manufacturing employer firms are small businesses, as 57 percent have less than 20 employees, and 80 percent less than 100 workers. Further movement toward price controls increases the risks that entrepreneurship will be restrained or reduced in this critical industry.

And of course, small businesses could see higher healthcare costs, which amounts to more cost pain on top of what they are already enduring now.  Make no mistake, all of Ohio will suffer – as well as the state’s newfound business competitiveness if this misguided ballot.

Let’s hope voters have the good sense to reject this counter-productive and poorly misnamed measure in November.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.

 

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