PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

STATE SPOTLIGHT: Idaho Moving in the Right Policy Direction

By at 21 October, 2019, 7:58 pm

by Raymond J. Keating-

Small Business Policy Index 2019: Idaho ranked 26th 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: Idaho ranked 34th among the 50 states.

 SBE Council’s “Small Business Tax Index 2019” is a subset of the Small Business Policy Index report, and ranks 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.

Idaho had long presented a less-than-hospitable policy climate for entrepreneurship, small business and investment, but it has taken some recent steps in the right direction.

SBE Council’s “Small Business Policy Index 2019: Ranking the States on Policy Measures and Costs Impacting Entrepreneurship and Small Business Growth” ranks the 50 states according to 62 different policy measures, including assorted tax, regulatory and government spending measures. Idaho ranked 26th among the 50 states. The state also came in 34th on the “Small Business Tax Index 2019,” which is a subset of the larger Small Business Policy Index, whereby the states are ranked just on tax measures.

Now, these aren’t exactly impressive. That is, being in the middle of the pack on the “Small Business Policy Index,” and a rather lowly (but not the worst) ranking on the “Small Business Tax Index.”

The state certainly has its positives – such as the lowest level of state and local government spending; no death tax; second lowest level of state and local government debt; and low crime rate. Those are noteworthy. But among challenges on the negative side are high individual and capital gains taxes; and fairly high unemployment taxes.

Recent Tax Reduction

But there’s more to the income tax story in Idaho. Since the previous year’s Index, Idaho reduced its top individual income and capital gains tax rate from 7.4 percent to 6.925 percent, with the corporate income and capital gains tax rates matching that change. That’s a clear plus, and it improved Idaho’s competitive position.

But there’s so much more that Idaho needs to do, such as further income and capital gains tax rate reductions.

Idaho is in an interesting spot geographically. It has neighbors like Montana and Oregon, and is not far from California, and each of those states rank poorly on the Index.

Meanwhile, other states in the neighborhood – namely, Washington, Nevada, Utah, and Wyoming – rank quite well on the Index. So, Idaho elected officials should be incentivized to build on recent tax reductions in order to improve the state’s competitive edge versus certain states, and to work to gain ground on other states that offer friendlier climates for entrepreneurship and small business.

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

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