Morton J. Marcus is an economist formerly with the Kelley School of Business, Indiana University. His column appears in Indiana newspapers.
It must be the season. Another ranking of the states crossed my desk this week. That’s the second in two weeks. This time it’s from the Kauffman Foundation, the Kansas City organization that promotes entrepreneur development, and its polling affiliate, Thumbtack.com from San Francisco.
Briefly, this report tells us that Indiana’s small business friendliness rates a grade of B-, 18th of 38 states in the survey. This comes from a sample of more than 12,000 small businesses nationwide. Indianapolis, the only Indiana city reported in the survey, earned a slightly better grade of B, 35th of 82 cities rated.
Note: The information available applies only to firms that use Thumbtack to advance their business connections. Such firms are mainly in professional services; thus, retail and manufacturing sectors are under-represented. The data on the web site for this report suggest the results refer to the Indianapolis metropolitan area rather than to the city itself. From the methodological statement accompanying the report, we gather no evidence of how small businesses in Fort Wayne, Terre Haute, South Bend, Evansville and elsewhere feel about our state’s friendliness.
Indiana scored best (A) on health and safety regulations, followed by regulations in general and state/local tax codes (A- for each). This might not be a feather in our cap. It could be small business respondents are happy with low levels of regulation, poor enforcement, low tax rates and slipshod auditing of tax returns.
The Hoosier state had its lowest scores (D) on training and networking programs as well as on the ease of hiring new workers. These are strange results. Should state or local governments have the responsibility to provide training and networking programs or interpose themselves in the hiring process?
Much lip service is given to entrepreneurial activity and the value of small business for long-term economic development. However, it is unlikely state and local governments can ensure aspiring business owners understand the regulations and requirements of starting a business. Despite efforts by Chambers of Commerce and other organizations, many start-ups are founded by people who remain ignorant of various laws and regulations until they are unceremoniously bitten in the posterior by what they don’t know.
This study does not give us sufficient state-by-state data, but it is worth noting that 64 percent of all respondents believe they are paying their rightful share of taxes. Even a majority of those who self-identify as strong conservatives indicate they too pay the right share of taxes.
When the size of the enterprise is considered, the smaller the firm the less likely the owner feels he/she is paying too much in taxes. Among those who have five or fewer employees, only one-third feel he/she pays too much in taxes.
I don’t know if the governor’s office looked at this survey; it might be worthwhile if they did before continuing with their campaign to restructure Indiana’s taxes. But then we don’t know if they are ever swayed by facts.