Garden State Lawmakers Work Hard to Make New Jersey the Worst State for Small Business

By at 28 May, 2019, 7:42 am

by Raymond J. Keating-

New Jersey Ranks Dead Last for Small Business Policy Friendliness

Small Business Policy Index 2019: New Jersey ranked 50th, or dead last, among the 50 states.

SBE Council’s “Small Business Policy Index 2019” ranks the 50 states according to 62 different policy measures, including a wide array of tax, regulatory and government spending and performance measurements.

Small Business Tax Index 2019: New Jersey ranked 50th, or dead last, among the 50 states.

SBE Council’s “Small Business Tax Index 2019” is included in the Policy Index report, ranking the states according to a wide array of tax measures, including income, capital gains, property, death, unemployment, and various consumption-based taxes like state gas and diesel levies.

State lawmakers have to work hard to create a policy climate that is hostile to entrepreneurship, small business and investment. New Jersey succeeds quite well at this work. It’s not easy to impose policies that completely ignore a wealth of economic common sense, analysis and history, but again New Jersey lawmakers thrive in this area.

According to SBE Council’s “Small Business Policy Index 2019: Ranking the States on Policy Measures and Costs Impacting Entrepreneurship and Small Business Growth,” which ranks the 50 states according to 62 different policy measures, including assorted tax, regulatory and government spending measures, New Jersey came in dead last among the 50 states. For good measure, on the “Small Business Tax Index 2019,” which is a subset of the larger Policy Index, whereby the states are ranked on tax measures, New Jersey, once again, ranked worst – 50th among the 50 states.

New Jersey’s Costly Policy History

While residents and entrepreneurs in New Jersey likely aren’t surprised by the Garden State’s ranking, I actually was a bit taken off guard. Don’t get me wrong, for as long as I’ve been ranking the states on policy measures (and I’ve been doing this kind of work for more than a quarter-century and this is the 23rd edition of the “Small Business Policy Index”), New Jersey always has ranked poorly. And that’s been the case even as the make-up of the Index has changed over the years (which means that year-to-year reports and results are not strictly comparable).

No matter the measures included, though, New Jersey could be counted on to rank among the most costly states to start up, build and invest in a business. But there was another constant from year to year, and that was that California would come in dead last. For me, it almost became a law of public policy, i.e., when it comes to its policy climate, California’s would be the most hostile toward entrepreneurship and small business in the nation.

But this year was different. California certainly did nothing to improve its ranking, and yet, it now ranked 49th among the states, not 50th. Instead, New Jersey overtook, if you will, California to offer the very worst public policy climate for entrepreneurship and small business.

How New Jersey Did It This Time

So, how did New Jersey accomplish such a dubious feat? Well, first, it must be recognized that the state’s policy ills are overwhelming enough to make it one of the worst states. Those negatives include very high state personal income, individual capital gains, corporate income and corporate capital gains tax rates; the third highest property tax burden; high gas and diesel taxes; a high energy regulatory burden; third highest workers’ compensation costs; high levels of state and local government spending and debt; the highest level of unfunded public pensions; a death tax; a high minimum wage mandate; and poor private property protections.

But there’s more in terms of recent policy changes. New Jersey increased income tax rates. The individual income and capital gains tax rate increased from 8.97 percent to 10.75 percent. And the top corporate income and capital gains tax rates jumped from 9.0 percent to 11.5 percent, which is now the highest state corporate tax rate among the 50 states. Those changes took New Jersey from ranking 49th among the states to sinking to the worst, displacing California at the very bottom of the “Small Business Policy Index” and the “Small Business Tax Index.”

While the competition certainly has been stiff, New Jersey lawmakers have shown real determination in making sure that New Jersey has the worst state policy climate for small business in the nation. Indeed, New Jersey makes clear that if you work hard and ignore economic reality, you can get the policy climate for small business completely wrong.


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



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