PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

STATE SPOTLIGHT: Arizona Takes More Positive Steps for Small Business

By at 30 January, 2020, 8:53 pm

by Raymond J. Keating-

Small Business Policy Index 2019: Arizona ranked 9th 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: Arizona ranked 11th 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.

Arizona ranks very favorable among the 50 states in terms of its policy climate as it affects entrepreneurship, small business and investment. For good measure, recent reports indicate that the state is poised to make further improvements.

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. Arizona ranked ninth best, among the 50 states. The state also came in 11th on the “Small Business Tax Index 2019,” which is a subset of the larger Policy Index, whereby the states are ranked just on tax measures.

The state clearly has numerous plusses, including no death tax; fairly low individual capital gains and gas taxes; relatively low workers’ compensation costs; second lowest level of state and local government employees; a relatively low level of state and local government spending; low levels of land-use and zoning regulation; and is a right-to-work state.

For good measure, Arizona has a relatively low corporate income and capital gains tax rate, and that rate has been reduced notably over the last several years. For example, in 2010, the Arizona corporate income and capital gains tax rate stood at 6.968 percent, and has since been reduced to 4.9 percent.

Ducey Announces Executive Order on Regulation, No New Taxes

As mentioned, though, further relief appears to be on the way. For example, in his State of the State address, Governor Doug Ducey announced, “I’ve issued a new Executive Order, with a new reform: If the government ever deems a new regulation absolutely necessary, it must first identify three others to eliminate. The result: New regulations will naturally mean less regulations.”

Reduced regulatory burdens are particularly helpful to smaller businesses.

On taxes, he also pledged: “Let me reiterate what I’ve said in five prior state of the state speeches, and two inaugural addresses—because apparently it bears repeating—no new taxes; not this session, not next session; not here in this chamber, not at the ballot box, not on my watch.”

In addition, an assortment of tax relief measures are being considered by state legislators, and that includes increasing the state’s capital gains exemption from 25 percent to 50 percent, which would reduce the individual capital gains tax rate from 3.405 percent to 2.27 percent. That rate cut would be a big plus for the state by enhancing the potential returns on entrepreneurship and investment.

Arizona continues to make strides in a pro-entrepreneur, pro-growth direction. In addition, Governor Ducey has been a national leader in licensing reform, by accepting the issuance of occupational licenses from other states for many types of jobs in Arizona. This allows workers and entrepreneurs to save time and money, and get to work more quickly.  Other states would do well to take note of Arizona’s policy initiatives.

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

 

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