PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Election 2018: Results on Key State Ballot Measures Impacting Small Business & Entrepreneurship

By at 8 November, 2018, 9:31 pm

Small Business Insider

by Raymond J. Keating-

Small Business Policy Index 2018: SBE Council’s “Small Business Policy Index 2018” 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: 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.

Much of America on Tuesday night, November 6, understandably was watching how votes across the nation would affect the balance of power in Congress. But there was much more, of course, going on in the ballot booth. Decisions were made in the states that – just as is the case with control of Congress – will impact entrepreneurship, small business and the economy.

The effects of these and other policy decisions can be found in the Small Business Policy Index 2018: Ranking the States on Policy Measures and Costs Impacting Small Business and Entrepreneurship, which I write for the Small Business & Entrepreneurship Council.

The Index offers the most comprehensive comparison of the states in terms of policy decisions affecting the economy. Of the 55 measures included in the 2018 edition of the Index, 27 are taxes or tax related, 20 relate to rules and regulations, 5 deal with government spending and debt issues, with the 3 remaining measures gauging the effectiveness of important government undertakings. In turn, the Small Business Tax Index 2017: Best to Worst State Tax Systems ranked the states exclusively based on tax or tax-related policies.

So, let’s consider the results of assorted ballot measures from November 6.

Arizona: Voters overwhelmingly (65.1 percent to 34.9 percent) approved Proposition 126, which is a constitutional amendment prohibiting state and local government from imposing new or increasing existing taxes on services.

Voters also rejected (69.8% to 30.2%) Proposition 127, which would have dramatically increased the state’s renewable energy mandate on utilities.

These are positive measures for Arizona’s policy climate.

Arizona ranked 6th on the “Small Business Policy Index 2018” and ranked 11th on the “Small Business Tax Index 2017.”

Arkansas: Voters approved (68.4% to 31.6%) an increase in the state’s minimum wage mandate, rising to $11 per hour by 2021.

Increasing costs for small businesses and reducing opportunities for inexperienced, young and low-skilled workers is a negative for the state.

Arkansas ranked 37th on the “Small Business Policy Index 2018” and ranked 37th on the “Small Business Tax Index 2017.”

California: Voters rejected Proposition 6 (55.3% to 44.7%), which would have repealed the gas and car tax increases imposed by the state legislature in 2017.

Also, voters in San Francisco approved Proposition C (59.5% to 40.1%), the largest tax increase in the city’s history, imposing a gross receipts tax on businesses with revenues exceeding $50 million annually. However, various reports point to legal challenges ahead.

Higher taxes for small businesses and consumers at the pump, and imposing a new, large tax on businesses in San Francisco make an already-hostile policy climate in California even worse.

California ranked 50th on the “Small Business Policy Index 2018” and ranked 50th on the “Small Business Tax Index 2017.”

Florida: Voters approved (66.5% to 33.5%) Amendment 2, which will amend the state constitution to permanently limit property tax assessment increases on non-homestead real property (such as second homes, rental properties, vacation homes, vacant land and commercial property), excluding school district taxes, to 10 percent annually.

Voters also approved (65.8% to 34.2%) Amendment 5, which is an amendment requiring all increases in taxes or fees, or the creation of new taxes or fees, to pass both chambers of the Florida Legislature by a two-thirds vote.

These are clear positives – especially approval of Amendment 5 – for Florida’s policy environment for entrepreneurship, small businesses, investors and workers.

Florida ranked 5th on the “Small Business Policy Index 2018” and ranked 6th on the “Small Business Tax Index 2017.”

Missouri: Voters approved (62.3% to 37.7%) an increase in the state’s minimum wage mandate, rising from $7.85 per hour to $12 in 2023.

Voters rejected Proposition D (53.6% to 46.4%), which would have increased the state’s gas tax from 17 cents per gallon to 27 cents by June 2022.

It was a split decision in Missouri. Increasing costs for small businesses and reducing opportunities for inexperienced, young and low-skilled workers via a minimum wage increase is a negative for the state, while rejecting a gas tax increase was wise.

Missouri ranked 19th on the “Small Business Policy Index 2018” and ranked 21st on the “Small Business Tax Index 2017.”

Nevada: Voters approved (59.3% to 40.7%) Question 6, which increases the renewable portfolio mandate on utilities to 50 percent of electricity produced in 2030.

Mandating higher energy costs for individuals, families and businesses of all types and sizes was a bad decision for Nevada.

Nevada ranked best (1st) on the “Small Business Policy Index 2018” and ranked 1st on the “Small Business Tax Index 2017.”

North Carolina: Voters approved (57.1% to 42.9%) a state constitutional amendment that would reduce the maximum state income tax rate allowed from 10 percent to 7 percent. As explained by the North Carolina secretary of state:

“This proposed amendment does not reduce your current taxes. It does not change the current individual income tax rate of 5.499%, and it does not change the current corporate income tax rate of 3%. Instead, it limits how much the state income tax rate could go up.”

North Carolina has made impressive steps in recent years on the tax reform front – indeed, among the most positive changes in the nation – and this is another positive step, serving as a guard against future lawmakers imposing overly burdensome tax increases.

North Carolina ranked 17th on the “Small Business Policy Index 2018” and ranked 9th on the “Small Business Tax Index 2017.”

Oregon: Voters rejected (57.1% to 42.9%) Measure 103, which called for a state constitutional amendment prohibiting state and local government from imposing taxes on the sale or distribution of groceries.

In addition, voters rejected (65% to 35%) Measure 104, which would have amended the state constitution to basically clarify what the current constitutional requirement for a 3/5 super majority vote to raise revenue means.

Oregon already offers a costly policy environment, and these votes keep doors open to matters getting even worse down the road.

Oregon ranked 42nd on the “Small Business Policy Index 2018” and ranked 42nd on the “Small Business Tax Index 2017.”

State of Washington: Voters rejected (56.3% to 43.7%) Initiative 1631, which would have, if passed, effectively imposed a $15 per metric ton tax on carbon emissions mainly from utilities and sellers of fossil fuels; would have subsequently increased $2 per ton per year plus the rate of inflation.

Voters also approved (54.8% to 45.2%) Initiative 1634 prohibiting local governments from imposing taxes on groceries.

Washington voters wisely chose to reject higher energy costs via a carbon tax, and to support limits on local taxation.

Washington ranked 7th on the “Small Business Policy Index 2018” and ranked 5th on the “Small Business Tax Index 2017.”

So, in terms of state ballot issues on November 6 affecting entrepreneurship and small business, the results were mixed across the nation. But the big positive arguably came in Florida with voters approving a constitutional amendment requiring two-thirds votes in each legislative chamber to raise or impose new taxes and fees.

The contrast between the results in the two largest states highlighted above, California voters chose to make matters worse in the state with the worst policy climate for small business, while voters in Florida chose to improve conditions in a state ranked among the best policy climates for small business.

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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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