For the second year in a row, a nationwide survey of business owners found Maryland lagged behind the bulk of states in overall business climate.
The survey, conducted as a joint effort between the business-to-business website Thumbtack.com and the Kauffman Foundation, quizzed nearly 8,000 business owners and operators across the country, asking them to grade their respective states in a number of categories related to their perception of the business climate.
While Maryland graded out as a “C” overall – improving from a “C-” grade in 2012 – it ranked ahead of just 12 states in the survey; on the other hand, 26 states made a better impression on their entrepreneurial denizens. (Eight states lacked the requisite number of responses for their results to count; included in that group were neighboring Delaware and West Virginia.) While Maryland paled in comparison to Virginia, which received an “A” grade overall, it did better than Pennsylvania’s “D+” mark.
Another unique feature of this survey, though, was the addition of written responses from various business professionals throughout the state. Maryland’s overall “C” grade seems to be belied by some of the comments given in response to the survey – for example, a marketing specialist in Baltimore wrote,”The tax structure in Maryland is hurting small businesses and their owners. A more business friendly environment in Virginia is causing me to consider relocating the business there.”
Sure enough, Virginia seems to have earned its grade given the number of businesses relocating there (many from Maryland) over the last few years.
Another business owner, this time a general contractor in Gaithersburg, bemoans the tax climate here, pointing out that,”To start business in my state has been a long time period of paperwork and fees and examinations. Once the process is started, there has been no help from the state or county to obtain business. The only thing this the state cares about is your taxes and fees.”
A Walkersville production company owner adds, “Sales tax is charged on services. No other state that I have lived in requires services to be taxed.”
In general, “Maryland is a very unfriendly business state,” said a cleaner in Owings Mills.
And while not all the responses were negative, with one photographer saying “it was easy to start a business in Maryland,” and praising the state’s SBA and websites, all but a couple of the fifteen or so written responses panned some aspect of starting and succeeding at business in Maryland.
And this isn’t lost on those who conducted the survey, either.
“It is critical to the economic health of every city and state to create an entrepreneur-friendly environment,” said Dane Stangler, Director of Research and Policy at the Kauffman Foundation. “Policymakers put themselves in the best position to encourage sustainable growth and long-term prosperity by listening to the voices of small business owners themselves.” It’s likely that 37 tax increases in a row over the last six-plus years does not an entrepreneur-friendly state make.
When I asked Sander Daniels, who commissioned the study as the co-founder of Thumbtack.com, about his perspective on the problems a state like Maryland faces, he made several points.
(As for) general advice for state/local officials (on improving their grade), I would say that it makes the most sense to identify the primary pain points for your small businesses and to balance this with what are the low hanging fruit in terms of improvement.
For example, we found that licensing/permitting regulations are very important to small businesses. They often need to be reformed along two dimensions: the requirements themselves, which are often outdated or were the result of regulatory capture by extant businesses, and the number of overlapping regimes…covering the same issue at the city, county and state level. Fixing these issues is important; however, it is also time consuming and challenging. So, while working on these important but long term reforms, the state could simultaneously focus on smaller improvements like ensuring that more forms and processes are handled through easy to use websites…
(On taxes) our analysis was on a national level. Also, I should probably clarify slightly. It’s not that taxes weren’t important – in fact they were one of the most important factors – but that licensing regulations were often more important, particularly to new and expanding firms. We felt that this is an important thing to highlight given that while taxes are a frequent topic of conversation, licensing and permitting regulations get comparatively little airtime.
But the lesson which needs to be learned comes from a Virginia businessman who noted, “Maryland is losing companies to Virginia due to heavy taxation, although the federal government presence is as prominent there as it is here in Virginia. When government gets out of the way – companies thrive.” It’s not clear which portion of StateStat or the so-called “Genuine Progress Indicator” (read: excuses for poor economic performance) might cover this part of the equation, but the message couldn’t be more clear.
Crossposted on Watchdog Wire, with quote from Sander Daniels added here.