PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

A Contrast in State Policy for Small Business: California v. Nevada

By at 10 June, 2019, 12:13 pm

by Raymond J. Keating-

Small Business Policy Index 2019: Nevada ranked number two – or second best – among the 50 states, while California ranked 49th – or second worst.

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: Nevada ranked number three – or third best – among the 50 states, while California ranked 49th – or second worst.

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.

California and Nevada, of course, are neighboring states. However, when it comes to the burdens inflicted via public policy, it’s like they exist on different planets.

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, Nevada came in second best and California second worst among the 50 states.

The story was similar regarding the “Small Business Tax Index 2019,” which is a subset of the larger Policy Index, whereby the states are ranked just on tax measures, with Nevada coming in third best and California, once again, second worst.

The differences can be striking.

For example, Nevada imposes no personal, individual capital gains, corporate income, corporate and capital gains taxes. In contrast, California has the highest state personal income and individual capital gains tax rates; and high corporate income and capital gains taxes. These comparisons basically put an end to the contest. But there’s more.

Nevada has fairly low workers’ compensation costs, while California has the second highest workers’ compensation costs.

Nevada has the fourth lowest level of state and local government spending, while California has a high level of government spending. In addition, the recent five-year government spending trend has been constrained in Nevada, while California spending has risen at a quick pace.

Nevada also is a right-to-work state, while California is not.

In addition, Nevada imposes very low wireless taxes, while California’s wireless tax burden is high.

As for shared positives, each state does not impose a state death tax. Also, Nevada has the lowest level of state and local government employment, and California comes in at a respectable seventh.

There are negatives for each state as well. For example, California and Nevada impose heavy energy regulatory burdens, both states inflict a high state minimum wage, and each has a high level of state and local government debt.

For good measure, there are even a few spots where California performs better than Nevada, such as California having the lowest unemployment tax, while Nevada’s is high.

But make no mistake, while there are a few areas where the two states are comparable, and even some rare instances where California does better than Nevada, the overwhelming burden tilts heavily against California.

In major areas and overall, Nevada presents light governmental burdens and costs for entrepreneurs, small businesses and investors, while those burdens imposed by California rate among the most costly in the nation. In fact, it’s not really close.

Not surprisingly, California is losing residents because of high costs.  What states are they largely moving to?  Most of these states happen to rank competitively on SBE Council’s “Small Business Policy Index 2019.”  Nevada is the fifth most popular state for Californian’s to move to, while Texas is the most popular (which ranks #1 on our Index.) They also like Arizona (#9 on the Index) and Oregon, which happens to be an outlier in terms of policy competitiveness at #43.

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

 

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