PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

STATE SPOTLIGHT: Virginia Lawmakers Working Against State’s Competitiveness

By at 14 February, 2020, 12:47 pm

by Raymond J. Keating-

Small Business Policy Index 2019: Virginia ranked 16th 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: Virginia ranked 22nd 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.

What’s Going on in Virginia?

Virginia ranks generally favorable versus many other states when it comes to establishing a friendly public policy environment for entrepreneurship, small business and investment. However, there’s certainly room for improvement. Unfortunately, rather than pursuing positive reform measures, various state lawmakers have been looking to take steps backward. One effort has been focused on trying to repeal the state’s right-to-work status. Thankfully, that has been shelved … for now. However, lawmakers are pushing ahead with a hike in the state’s minimum wage mandate.

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. Virginia ranked 16th among the 50 states. The state also came in 22nd 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.

Being in the top half of the Index, of course, is much better than being in the bottom half. And Virginia has some real positives, including no death tax; fairly low consumption-based taxes; low unemployment taxes; a relatively low gas tax; fairly low workers’ compensation costs; and is a right-to-work state.

Ah, but it’s that last plus that assorted Virginia lawmakers were looking to eliminate this year.

Right-To-Work Strengthens Competitiveness

Virginia became a right-to-work state in 1947, and the state’s businesses, workers and economy have benefited. How so? Well, as noted in the “Small Business Policy Index 2019:”

“A right-to-work state means that employees generally are not forced to become labor union members or pay dues to unions. Such worker freedoms offer a more dynamic, flexible workforce, and a more amenable environment for increased productivity and improved efficiency.”

But Virginia’s longtime status as a right-to-work state came under attack thanks to labor union lobbying and receptive ears among various lawmakers.

However, the effort just came to an end. As reported by WVTF.org:

“Democratic Governor Ralph Northam said repealing the right to work law is unrealistic. ‘We will have that discussion if and when it gets to my desk,’ said the Democratic governor. As it turns out, the governor will not be having that discussion. The New Democratic majority in the House killed the bill by not putting it on the agenda for the last Appropriations Committee meeting before the crossover day deadline.”

As reported, labor union leaders thought this was the year to repeal the right-to-work law with a Democrat-controlled legislature. What’s next then? WVTF reported:

“Labor leaders are hoping to make this a major issue in the primary for governor next year, identifying a candidate for governor who will commit to repealing the 1940’s-era right to work law before he — or she — moves into the Executive Mansion.”

There’s More…Minimum Wage Hike on the Move

Unfortunately, unions are having success in pushing another measure in Virginia that would reduce work opportunities for young, inexperienced and low-skilled workers, and raise costs for small businesses. That is, a minimum wage increase. While Virginia’s current minimum wage simply matches the federal level, a bill passed the Virginia House on February 11 that would hike the minimum wage mandate to $10 per hour, and then to $11 as of July 1, 2021; $13 per hour on July 1, 2022; and $15 as of July 1, 2023.

In reality, of course, compensation is based on productivity and the value offered in the marketplace. For good measure, workers increase their earnings through education, experience, training and so on. That would be undercut by a higher minimum wage, which would reduce work opportunities. Indeed, government cannot simply declare what wages should be without there being real costs to pay. And again, it’s workers and small businesses that bear most of those costs.

As SBE Council recently pointed out, labor unions have become increasingly irrelevant in the private sector, so unions have concentrated on expanding government’s interference in the economy. That is, labor unions have been playing politics and become a vehicle for lobbying for bigger government – as opposed to actually representing workers. And labor union efforts to raise costs, eliminate worker freedoms, and reduce economic dynamism in Virginia is not about to come to an end anytime soon.

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

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