How much will it cost? (Part four of a multi-part series)

September 3, 2018 · Posted in All politics is local, Business and industry, Campaign 2018, Delmarva items, Maryland Politics, National politics, Politics, State of Conservatism · Comments Off on How much will it cost? (Part four of a multi-part series) 

Since I was talking about the minimum wage in part three and the focus on the Ben Jealous “Make It In Maryland” plan was getting long in the tooth, I decided to split the piece in two and focus on the remaining items as a series of bullet points in this portion. While I wasn’t truly intending to space it that far, it does make for a good Labor Day post.

So these are the remaining topics in his MIIM plan, listed as a series of points I’ll respond to one at a time.

  • Creating a Governor’s Office of Tech Transfer
  • Better Retaining and Supporting Maryland’s Entrepreneurs
  • Reclaiming Maryland’s Position in Biotech and Life Sciences
  • Ensuring Prosperity Reaches Everyone By Tackling Chronic Unemployment
  • A Job Boosting Program For Every Marylander Who Wants To Work
  • Ending Youth Unemployment And Underemployment
  • Boosting Employment For The Formerly Incarcerated
  • Reviving Maryland’s Rural Communities
  • Making Maryland A Center Of Global Commerce
  • Connecting Workers To Jobs With A 21st Century Transportation Plan

Office of Tech Transfer: Jealous begins this section by citing a number of vague, subjective statistics, including this howler straight from the Joe Biden School of Spelling:

The top five states for cybersecurity deals in quarter 1 of 2018 were California, Massachusetts, New York, and Texas.

These states are also bigger than Maryland, and have various industries and factors which may give them a natural advantage. Regardless, while it’s unknown just how large this OTT will be or where it’s placed on the pecking order, the biggest cost might be the freedom to elude red tape, to wit:

Help to coordinate infrastructure and development policy, including multimodal and active transportation infrastructure, smart growth land use planning, mixed-use development, and gigabit internet to create the urban fabric and connections that give rise to an innovation ecosystem.

I truly have issues with that sort of mission creep and interference with both local government and the private sector. As envisioned it seems to be more than just a clearinghouse that could be useful in coordinating a limited area of policy.

Maryland’s entrepreneurs:

While Jealous paints a picture of a state that’s not inclusive enough…

Ben Jealous will create the innovation environment that will enable more locally grown companies to grow and stay in Maryland. Ben Jealous will also consider whether rules related to bonding for contractors can be eased to enable more entrepreneurs to access contract work and remove  unnecessary barriers. He will also work to make entrepreneurship more inclusive in Maryland. For example, black women are the most likely of any population group to become entrepreneurs, but they are the least likely to receive funding.

Ben Jealous will create a more level playing field to ensure this changes. As governor, Ben Jealous has also committed to raising women and minority business targets in the state to levels that better reflect equal representation. 29% is just far too low when 50% of our population are women and nearly 50% identify as minority. In order to support creation of these businesses, Ben Jealous has pledged to work with lenders who have a history of inclusive lending to support their models, identify additional strategies to capitalize businesses, and review bonding requirements for contractors that may pose unnecessary barriers.

…if you ask actual entrepreneurs they may say the problem is a little different.

For several years I was the recipient of a steady diet of updates from a company called Thumbtack.com – it’s actually a listing of entrepreneurs who provide various services. Over that period they have done a survey of business friendliness, which – even though I haven’t noticed the updates – has continued to this day and shows Maryland has been on an upward trajectory. But while Maryland has rebounded from failing grades to a B+ in Thumbtack’s 2018 survey, the one category they still receive a big fat F in is the tax code. That’s not on the Jealous agenda.

I don’t look at who owns a business, I look at the job they do – and so do most others. All affirmative action does is plant a seed in the mind of people who ask: did they get the job on their merits or because they checked a box of government approval someplace?

Oh, and one more thing:

Another critical part of changing our business culture in Maryland also is support new and emerging types of business ownership, including employee-owned businesses, worker co-ops, and other democratically-owned and operated businesses. These organization types are critical for challenging the notion that ownership of a business must concentrate profits in the hands of a few, and these organization types can open up the benefits of business ownership to many more individuals.

Whether a business is employee-owned or not – one good reasonably local example of employee ownership is the Redner’s grocery chain, which has very nice stores based on my experiences working in them a few years back in a previous career – doesn’t matter to me. But the fact Jealous opposes the “notion that ownership of a business must concentrate profits in the hands of a few” when it’s truly none of the state’s damn business is troubling.

Biotech and Life Sciences: This is mostly a series of platitudes whining about how Maryland has fallen from the top position, particularly behind Massachusetts which “made large investments in biotechnology through tax breaks, grants, and funding infrastructure.” That’s their taxpayers on the hook, so whatever.

If I were to make a suggestion for state encouragement, why not promote the area of biotech that deals with the agriculture industry? People tend to think of this as an urban phenomenon, including those at the state Department of Commerce as agribusiness is last among its “key industries.”

But maybe Jealous should read the state’s website because there’s already a program in place.

Chronic Unemployment: Aside from a vague pledge to “engage stakeholders” and conduct yet another useless study, Ben wants to throw more money at EARN Maryland (reversed as “Maryland EARN” in the Jealous plan), Operation HIRE (aimed at veterans), and the Maryland Apprenticeship and Training Program. While none would be large expenses, one has to wonder if having these disparate programs is very efficient and effective.

Job Boosting Program: To make a long story short, it’s a hiring program to create more state and state-dependent workers. Jealous cites a study done by the Department of Legislative Services that cites a chronic shortage of workers necessitated by budgetary reality. But the source material for the study makes me question its sincerity:

Research for the study consisted of data gathered from various documents; workload trend data; agency site visits; and meetings with the representatives of the American Federation of State, County, and Municipal Employees (AFSCME) and AFSCME employees. (My emphasis.)

It’s also worth noting that the number of employees the executive branch has been “shorted” is nearly matched by the number of additional positions at higher education, where staffing has increased 23% from 2002-18 (Executive Branch staffing is down 9.6% in that period.) Honestly, I don’t think we have a neutral referee doing this study. Needless to say, many of these new workers will be quickly absorbed into the public-sector union, which is, I’m sure, their quid pro quo for AFSCME support.

Youth Unemployment: Jealous would expand the YouthWorks program in Baltimore City to a statewide program and make internships or part-time jobs part of the public school curriculum. It seems to me the YouthWorks would be better tailored to a county or city level (one reason being: the city of Salisbury has a similar program in conjunction with the local Junior Achievement branch.) So the opportunities are already there.

As for the school curriculum, this is a matter where public schools could compete when it comes to school choice.

Formerly incarcerated: I believe Jealous is going to work along these lines by “banning the box” in private-sector employment (meaning applications cannot inquire about criminal record) and adding incentives to hire formerly incarcerated – however, there are private-sector employers already doing so. I believe this should be on a case-by-case basis and not a mandate.

Rural communities: The message from Ben Jealous: you can grow, but only a little bit and only on our terms. Developed areas can retain their advantage because we won’t let you compete.

Smart growth and conservation policies that Ben Jealous will promote will help Maryland to restore its reputation as a one that protects its most valuable natural resources, from farmland, to the Chesapeake Bay, to mountains, forests, and beaches. When our natural resources in land, water, and air are cared for, rural places are able to thrive as producers of agricultural products, thriving tourism centers, and choice places to live. In a 21st century economy, rural economies are also transitioning into being producers of clean energy, like solar and wind farms. Land in rural areas near existing development and infrastructure can be repurposed or ethically developed to host clean tech manufacturing, data centers, and other 21st century economic engines. Finally, rural economies are powered by small businesses, and, with proper support for early stage businesses throughout rural Maryland, these small businesses will continue to multiply and grow.

Basically, this is an extension of the MOM era where most agricultural land would be placed off-limits to development (except for solar panels and wind turbines, which are neither reliable nor desirable sources of energy). And say what you will about “low-impact tourism” – I will show you the difference between the economic base that is Ocean City in the summer season against whatever is drawn by Blackwater being a wildlife refuge. That’s not to say that I’m not glad we have the industry we do here, but we shouldn’t say no to more traditional development even if it’s placed in a more rural area.

This also ignores the transportation needs of this region, such as a second (southern) Chesapeake Bay crossing and, in cooperation with Delaware, an interstate-grade highway connection north to I-95.

As governor, Ben Jealous would provide additional funding to the state’s cooperative extension programs to develop technical assistance programs providing support to farmers transitioning into the 21st century marketplace. This would include linking urban agriculture and food production businesses with rural agricultural businesses, so Maryland families, restaurants, and commercial producers can conveniently access an abundance fresh agricultural products grown right here in Maryland.

If you were a savvy farmer, wouldn’t you already be doing this? Why is it a state concern?

We also have the talk of expanding broadband, the means of which is already in place here in Maryland as a non-profit cooperative. It will be interesting to compare their process and progress with Delaware, which is using more of a PPP approach for rural portions of Kent and Sussex counties.

Global commerce: Mainly deals with expanding Foreign Trade Zones around the Port of Baltimore. As the center of the local poultry industry that sends chicken products around the globe, I wonder why Salisbury couldn’t have one? Perhaps because it’s a federal designation. Jealous exhibits his Baltimore-centric view (and a little bit of ignorance) with this one.

A 21st Century transportation plan: The first page of this is devoted to Jealous whining about the cancellation of Baltimore’s Red Line boondoggle and Larry Hogan’s changes to Baltimore’s bus service. I think it’s hilarious how a 21st century transport plan uses the strategy and limitations of 19th century technology by advocating for more usage of the light rail service money pit.

And then we get to this:

Complete streets policies build thriving and prosperous communities by ensuring that the design of roads and other facilities is safe and convenient for pedestrians, business patrons, cyclists, and all other road users. As governor, Ben Jealous will make Maryland a complete streets leader by ensuring that ample funding is directed to local communities through the complete streets and other programs like Maryland Bikeways, and by ensuring that the Maryland adopts the most progressive complete streets policy possible.

So we cater to the 2% of travelers who use alternate means of transportation – ones that aren’t nearly as convenient and useful at a time such as this moment with a thunderstorm overhead – at the expense of the 98% who would like to get where they wish to go as quickly and conveniently as possible. This also works hand-in-hand with the effort to pack people into the urban areas, leaving vast wildlife corridors for critters to traverse.

Aside from a means of taxation in some states, those who crave control hate cars because they equate to freedom of movement and less restriction on behavior. If it’s 6:30 and I want to be at a 7:05 ballgame, I’m not going to ride my bike or walk – and sure as heck ain’t going to consult the Shore Transit routes to see if any run and stop close by. I have a car and I’m going to drive it.

Most of us do not want to be at the mercy of someone else’s schedule, which is why driving is the predominant means of personal transport in the nation. People like Jealous don’t like that, so rather than make driving easier they would rather discourage it.

If you really want a 21st century transportation plan, make it easier to use that freedom of movement by improving the roads. Promote entrepreneurship by giving less of a hassle to services like Lyft, Uber, or whatever competes with them rather than try and regulate them like taxicabs, making an artificial market the locality can use to create revenue. And rather than create the incentives for employers to encourage their employees to commute, perhaps they should instead encourage the use of remote work where possible. Given the proper broadband connection to my work server and to my boss, I could reasonably do much of my job at home.

So for this segment I can’t tell you just what the Jealous agenda will cost in monetary terms, but it’s going to cost the taxpayer a lot to wander down some pathways better trod by private initiative.

I think I’m going to put this series on hiatus for a little while, since I have a couple other projects I’d like to concentrate on. Thus, I may not get to everything on the Jealous agenda but I think you probably get the picture anyway. So I’ll see if I’m ready to resume by month’s end or not.

Hogan’s uphill battle

For several years I have cited an annual survey of business friendliness put together by thumbtack.com. It was useful in illustrating how poor the Maryland business climate was.

Unfortunately, year one of the Hogan administration finds the state in a deeper hole, narrowly missing the bottom five of the 36 states for which the survey had sufficient data to compile. It is noteworthy, however, to point out Baltimore’s grade basically drove the state grade so they may bear a significant share of the blame.

As for what the survey asked and found specifically:

Small business owners found Maryland to be one of the least friendly states for microenterprise, though they widely approved of local training opportunities, according to Thumbtack’s annual Small Business Friendliness Survey.

Nearly 18,000 U.S. small business owners responded to the survey, including 442 in Maryland. The study asked respondents to rate their state and city governments across a broad range of policy factors. Thumbtack then evaluated states and cities against one another along more than a dozen metrics.

“Small business owners on Thumbtack have consistently told us that they welcome support from their governments but are frequently frustrated by unnecessary bureaucratic obstacles,” said Jon Lieber, Chief Economist of Thumbtack. “Maryland offers decent programs to support business owners directly, but they tell us the regulatory environment is just too hard for them to understand and navigate.”

“The taxes here are high,” commented a property manager in Baltimore. “There is no support from the government, especially the housing office.”

Here’s where entrepreneurs will pin their hopes on the new Regulatory Review Commission, which should try and reach out to as many of these businesses as possible to get suggestions.

The biggest problems with our state insofar as this subject goes is that its grade is getting worse – declining from a C- last year to its D+ this time – and Virginia got an A on the same survey. (Delaware had fewer than the 50 responses needed to get a grade.) Business owners hated the state in particular for its environmental and zoning regulations and government friendliness, both of which were given big fat Fs from those surveyed. (The former category also gets a “see, now what have I been telling you for the better part of a decade” from this writer.)

If a state is going to brag that it’s “open for business” it needs to be better than a D+ state. The work on regulatory reform should be in tandem with other avenues toward success like lowering the corporate tax rate (or, even better, figuring out a way to cut three cents out of every dollar in state spending and scrapping it entirely) and telling the liberals in Annapolis who keep whining about the need for combined reporting to pound sand. Another proposal I would have is adoping the proposed moratorium on new Chesapeake Bay regulations until the sediment at Conowingo Dam is addressed,

We have models for success all around the country so why should we be 31st out of 36? I can’t fault Larry Hogan for a lack of effort or his difficult circumstances, but we need leadership in this regard and if it means telling the people the truth about where the problems lie (hint: they hold 124 seats in the General Assembly) so be it.

Is the Hogan business mojo wearing off?

It’s only one survey of 280 small (perhaps micro-scale) businesses in Maryland, but a recent poll conducted by a company which should be familiar to regular readers calls into question the effectiveness of Larry Hogan’s efforts at improvement in Maryland’s business climate in his first few months in office.

In cooperation with the Kauffman Foundation, Thumbtack.com has done annual, quarterly, and now monthly surveys of small business sentiment around the country. (I’ve written about their surveys on business friendliness in the past.) While it comes in a more graphical form than I can readily share here, some items I gleaned from the most recent Maryland and national data follow:

  • In terms of revenue and overall financial outlooks, Maryland businesses are less positive than the rest of the nation in the former and fall right at the national mean for the latter. The good news, though, is that over 70% of these businesses have a positive outlook over the next quarter.
  • Less than half, however, rate their financial situation as “very good” or “somewhat good.” Maryland’s total is 45.9% compared to 48.1% nationwide.
  • Maryland businesses are more pessimistic about profitability than their national peers; still, over 60% think they will do better. On the other hand, their perception on business conditions is actually better than the national average – 53.4% in Maryland think they will be better in three months’ time, while only 51.9% nationally share that outlook.
  • Finally, 24% of Maryland micro-businesses anticipate hiring over the next three months, while just 22.1% do nationwide. But while only 2.1% of businesses nationwide thought they would need to furlough workers, that percentage was 2.5% in Maryland.

As I noted above, this data was compiled at different intervals. Until March, this was done as a quarterly survey; now it is monthly. But one asset of this approach is that I can go back to the beginning of the year, and in their release accompanying the information Thumbtack.com noted:

In June, respondents nationwide indicated reduced optimism about the economy for the third month in a row, though sentiment about current and future conditions continues to be higher than that reported one year ago.

Key findings for Maryland include:

  • Maryland small businesses reported a sharp decline across each of the metrics tracked by Thumbtack, with the strongest declines coming in their expectations about future financial conditions and the economy.
  • Maryland experienced one of the largest overall business sentiment declines in the country in June; the state is now below the regional and national averages for small-business sentiment and ranks 30th overall nationwide.
  • Sentiment is still higher than it was one year ago, reflecting a broad-based increase in perceptions of economic conditions by small businesses across the country.
  • For the second month in a row, small businesses nationally expressed increasing pessimism about future economic conditions, which have been the largest contributors to the decline in overall sentiment.

Thus, it sounds like Maryland is reflective of a national trend.

But it’s also worth noting that the 2015Q1 survey showed broadly higher numbers across the board – revenue outlook has declined 10.9 points, financial outlook 5.2 points, profitability 11 points, and business conditions 8 points.

In addition, those who thought they may be hiring declined from 26% to 24.1%. Only the respondents’ assessment of their financial condition stayed relatively unchanged, declining just 1/10 of a point.

Unfortunately, these were the types of numbers we came to expect in the O’Malley administration. Obviously Hogan apologists would argue that their guy has been in office less than six months and it takes time to turn the ship of state around. And they would be correct, as the Augustine Commission agenda sailed through the General Assembly with its effective date in October.

Yet to me much of that was a simple rearrangement of deck chairs on the Titanic. While we can’t do a whole lot about the national economic climate, one thing Maryland could have done was allow these entrepreneurs to keep a little more of their money by reducing personal income tax rates; meanwhile, they could accommodate the entire elimination of corporate taxes with modest budget cuts of 3% or less. (The corporate tax brings in just over $1 billion of a $40 billion budget.) This would encourage larger businesses to consider Maryland for their growth and create more spinoff work for these micro-businesses.

Think of it this way under my scenario – Justin relocates from New York to work at the new Maryland corporate headquarters of XYZ Company, which was attracted here by the zero corporate tax rate as well as the other benefits Maryland brings. He needs a guy to fix his laptop, someone to watch the kids while Justin and Mrs. Justin are at work, and so on and so forth. Imagine what 250 Justins can do for a community and how many extra jobs they create. (I’m sure someone somewhere has done a study on this but today I’ll work without a net.)

The point is that addressing regulation and red tape is great, but the financial incentive has to be there as well. Among states with flat corporate tax rates, Maryland ranks among the highest. On a personal income level, Maryland’s rates appear to be a little better but that doesn’t add in the local county tax. (Granted, other states may also have the same practice.)

Let’s just say this: with an agenda that includes financial incentives as well as some cooperation from thoughtful Democrats in the Maryland General Assembly, by this time next year we can have a far more optimistic business community and in a few months after that they can better enjoy the results of hard work because the state takes a smaller cut.

More evidence of business unfriendliness

For three years, the folks at Thumbtack.com, a service for entrepreneurs looking to trumpet their wares, has partnered with the Kauffman Foundation to produce a Small Business Friendliness Survey for much of the country. I’ve referred to this survey before on several occasions.

Out of 38 states which had enough data to analyze, Maryland falls in a range between 25th and 27th with a “C-” rating, placing it in a group with Michigan and Wisconsin. While it rated top grades (an A+) for training and networking programs, it had only one other good grade – a B+ in ease of hiring – and several D+ grades in regulations, tax code, licensing, environmental, and zoning.

There are a couple caveats to bear in mind for Maryland’s grade. There aren’t a whole lot of businesses surveyed, and the written responses came from a small area of the state representing Montgomery, Prince George’s, Howard, Frederick, and Baltimore counties as well as Baltimore City. Those are the areas which generally represent the Democratic strongholds of the state, which leads me to wonder whether the grades are inflated because the responses tend to skew toward a liberal population or whether their frustration level is such because they are conservatives in a liberal state. Regardless, you have a number of survey answers like this one from Severn:

Maryland is all about taxing entrepreneurs and driving them to other states.

To be fair, there were a lot of positive responses, too, like this one from Hyattsville:

I have no complaints. The state of Maryland does a very good job in providing incentives for small business owners like myself to continue to conduct business.

If you hold your cursor over a dot on the page, you can read the good and bad reviews – by my count there are 32.

But to me this is a good primer for politicians to read – real responses from real business people who are hustling daily. And you can easily compare notes with a state like Texas, where responses were plentiful (at least from the urban Dallas, Houston, Austin, and San Antonio areas) and the grades were outstanding across the board – Texas was the lone state to not have any B grades whatsoever, just straight A’s. (Virginia was also in a fairly elite category as well, along with Idaho and Utah.) That’s a very useful facet of this survey in my eyes.

Having three years of data to work with can be telling as well. Out of ten sub-categories the survey measured, Maryland slipped in eight of them between 2013 and 2014. (Only the “training and networking” improved, while “employment, labor, and hiring” stayed put. These were the two best categories for Maryland.)

It is a legitimate question to ask, though, whether the frequent talk over the last couple years about how bad Maryland businesses have it has become a self-fulfilling prophecy insofar as these survey responses are concerned. While there’s obviously been changes in law and regulation, they didn’t seem as bad as some of the grade drops may seem to indicate. But then these are the people in the trenches.

With the timing of the survey, I suspect it will be taken next year in the opening weeks of either the Hogan or Brown administration, and the responses may hold a key to what we can expect over the next few years as far as businesses see Maryland.

AC Week in review – July 13, 2014

July 13, 2014 · Posted in Business and industry, National politics, Politics · Comments Off on AC Week in review – July 13, 2014 

I had a varied palette of posts last week at my Sausage Grinder blog, touching on such diverse subjects as immigration, business climate, and entitlements. Segregated from each other, they may not make as much sense to the whole but the idea behind the site is to look at regulatory aspects and how they affect the practice of “made in America.”

Let me begin by noting that my AC cohort Ed Braxton may have stepped on my toes a little bit, but his contribution was a nice look at the sheer volume of regulations businesses in our nation have to deal with on a federal level. One Congressman is trying to SCRUB all that away. (The bill text is here.)

Those regulations, at all levels of government whether federal, state, or local, are chipping away at the perception business owners have about the local business atmosphere. For the third consecutive year, the website thumbtack.com partnered with the Kaufmann Foundation to gauge business friendliness – and the results were an overall disappointment. With states like Maryland and Delaware already shut down legislatively for the year, relief is nowhere in sight.

Meanwhile, with the number of Congressional calendar days for the 113th Congress dwindling to a precious few, there’s really not much action we could expect on the federal level; moreover, that time limit will also stop us from addressing entitlements like Social Security. I thought the “big, smelly elephant in the room” characterization was apt, particularly as we’ve let it linger for nearly a decade without a serious crack at reform.

There is an added bonus this week. I noticed two pieces I sent in over the Independence Day holiday weren’t picked up – not sure if my editor missed them because he was out or just what happened. (I do a lot of AC work on the weekends, so it should have been nothing unusual.) Since they actually relate with each other, and I don’t believe in letting good writing go to waste, I will post them – slightly modified for flow, of course – here this evening.

And don’t worry – my editor has three new pieces I wrote yesterday, on hot-button issues, to help fill the AC site. They should be up this coming week.

Maryland ranked among least business-friendly states – by business owners

April 12, 2013 · Posted in Business and industry, Delmarva items, Watchdog Wire · 1 Comment 

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.

Small business survey shows mixed results

Back in May I cited a survey of over 6,000 small business owners done by the Kauffman Foundation and the business-to-business website Thumbtack.com, but they return to this page after completing a survey of over 6,000 of their members in conjunction with George Washington University. I frankly found the results of this recent poll somewhat surprising.

According to this survey, which was analyzed by GWU, more business owners have confidence in Barack Obama – he of “you didn’t build that” fame – than in Mitt Romney, who actually built a successful business from scratch. Overall, 39% of respondents believed Obama was more attuned to their interests while 32% selected Romney. The remaining 30% were unsure.

Yet on the signature issue Obama trumpets, a large plurality believed it were bad for business. Obamacare was roundly panned by business owners, with only 20% agreeing that it helps their business but 41% suggesting the opposite. Three out of 10 of those replying strongly disagreed that Obamacare was helping them. The partisan bent was strongest there, with 42% of Democrats believing Obamacare helps them but just 16% of independents and a measly 4% of Republicans.

In other issues, such as Obama’s so-called tax cuts and the Small Business Administration loan program, results were about even both ways – only Obamacare drew the ire of this group of small business professionals. It is worth mentioning, though, that the Obama tax cuts were found helpful by 56% of Democrats but just 9% of Republicans.

Because I was surprised by these seemingly conflicting results, I asked Thumbtack.com owner Sander Daniels about the partisan breakdown of those who answered, since it was one of two key elements missing from an otherwise fairly thorough breakdown. (I also don’t have the raw numbers from the 6,000-plus who returned surveys, but I suspect the number of those who replied was pretty slim in flyover country.) He informed me separately that the numbers were 32% Democrat, 28% Republican, and 40% who considered themselves independent politically.

Daniels also pointed out that a Gallup Poll taken earlier this year which showed 40% of Americans at large considered themselves independent. However, that contrasts with more recent data from Rasmussen which shows just 29% of Americans consider themselves independent. The Rasmussen data also gives the overall partisan breakdown as 38-33 in favor of Republicans, as opposed to Gallup’s data which showed a 31-27 Democratic edge. Gallup also pointed out that independents tended to lean more Republican than Democrat, which suggests to me this poll is slightly tilted toward the Democrats. Remember, the Thumbtack.com survey found 6,000 small business owners out of the nearly 6 million listed in recent Census data. The GWU anaylsis corrected somewhat for disproportionate representation by state, but I wouldn’t be awfully surprised if urban areas were over-sampled at the expense of rural states.

I also found it intriguing that Dr. David Rehr, who coordinated the study at GWU, assessed the survey results as showing, “Entrepreneurs are feeling squeezed by the tight lending environment and want their political leaders to curb the influence of money in politics.” The latter statement seems more projection on Rehr’s part, since the question he refers to deals with the broader area of ethics, honesty, and corruption in government. I could just as easily say those are caused by too much power and influence over people from government rather than the money required to be elected, and I think I would be closer to the intent of what these business owners answered.

Another omission by the GWU summary was the group’s approval ratings of both President Obama and Mitt Romney. The question is asked in the survey but not revealed in either summary.

While there is a blizzard of facts and figures from the survey, perhaps the most interesting contradiction is this. Out of twelve issues ranked in importance for choosing the President, taxes were second-to-last, topping only foreign policy. (That may change now after recent events.) Less than 3% considered that the most important issue, with even social/moral issues drawing about 6 percent. (No surprise: Economy/jobs topped the list with 40 percent.)

But when asked how important a laundry list of issues were to their business, the number one “very important” answer was “tax rates and tax-related regulations” with 52 percent; it even beat out health care at 50 percent. Something about that doesn’t jibe, particularly when Barack Obama, the king of crony capitalism – in charge of a government whose regulations cost upwards of $1.75 trillion to the economy – is still thought of as better for business by nearly 2 out of 5 business owners.

I’ll bet they’re the first to fail when he’s re-elected.

Small business: it’s not just taxes, but regulations and training too

As a prominent member of the media (or more likely someone on a particular e-mail list) I received an advance notice of a study being released tomorrow; one which pinpoints some of the root complaints of small business owners around the country and, more importantly, grades states on how willing they are to help small businesses start up and prosper.

The study, which was a joint effort between the Kauffman Foundation and Thumbtack.com, a company which bills itself as “a place where you can hire help locally,” surveyed over 6,000 small business owners with some of the main goals being to find out:

  • In general, how would you rate your state’s support of small business owners?
  • Would you discourage or encourage someone from starting a new business in your state?
  • How would you rate your company’s financial situation today?

In all, the study counted up 21 different metrics, ranking each state and 40 cities across the country in their business-friendly attitudes. Locally Maryland graded out as a C- overall, which translated into a ranking would put them between 31st and 33rd. There were two other states with a C- and 12 states which had a D or F grade; meanwhile, six states did not receive a grade – Alaska, Hawaii, North Dakota, South Dakota, West Virginia, and Wyoming. Presumably they didn’t get a large enough survey sample from these smaller states. (The same holds true in our little corner of the state, as there were no responses south of Talbot County and only four on the entire Eastern Shore.)

Our state, surprisingly, did best on training programs with a B+ grade. I wasn’t shocked to see a low D+ grade on licensing, though. (The complete methodology and analysis is here.)

What did surprise me, however, was the fact Delaware only ranked as a C. But their tax code was given an A+ grade. Other adjacent states received overall grades of C (Pennsylvania) and A (Virginia.)

So why is this important?

Every so often, particularly when a new administrator takes over, we hear the government promise to make life easier for businesses by streamlining the process. But it seems that these words are just so much lip service in most cases – sure, you may see a “one-stop shop” but there are still reams of paperwork to fill out, license fees (read: government revenue) to collect, and other non-productive busy work for a prospective business owner to do. Obviously, a city or state which makes it easier to go through these hoops will eventually accrue an advantage over adjacent areas – it’s most painfully obvious in Maryland, which seems to lag behind neighboring Delaware and (particularly) Virginia in job creation.

The Founding Fathers had a vision of each state being its own laboratory of government, competing in how best to serve the public good. With respect to business climate, it’s obvious some are better than others and that’s one reason why some states are more prosperous.

However, with that being said, one also has to examine the goals of each state as well. If a state is interested in promoting job creation under the belief that a rising tide lifts all boats and their prosperity comes from the people doing well and contributing a small share of that wealth to the public coffers through reasonable taxation, that’s one philosophy I tend to agree with. On the other hand, if states figure that those who embark on business are cash cows to be milked until old Elsie crumples over from exhaustion, they do reasonably well until word gets out and people become fed up. The corollary effect of this philosophy is one where the public finds only large-scale businesses such as chain stores can be successful, because they have the overhead necessary to deal with these government-created issues whereas a mom and pop operation does not. Eventually that stifles competition,  leading to collusion and a system of corporate cronyism.

Maryland seems to fall into the latter category, and there’s only one key reason they can get away with it. If it weren’t for having the seat of federal government power close by Maryland would be an economic basket case much like most of the Eastern Shore, with little industry or development to speak of. That’s because business policies are set to take advantage of the economically captive audience of the I-95 corridor. Martin O’Malley and other Democrats speak of ‘One Maryland’ but in reality there are at least three, and perhaps four: the western section, which could prosper if allowed to exploit its natural resources, the center of the state which relies on government to succeed economically, and the Eastern Shore, where agriculture and tourism reign supreme. Southern Maryland is sort of a blend between the latter two because of Washington, D.C. and its sprawling growth down the Potomac River.

Granted, there are local economic factors in play as well: while Virginia is a relatively prosperous state as a whole, I wouldn’t characterize their Eastern Shore as thriving. Localities are the same way – as businesses open up around the outskirts of Salisbury, the downtown area dries up. Needless to say, government policies are far from the only reason people decide to locate a business where they do. But they can make a difference in whether an enterprise succeeds or not. If taking eggs from the golden goose is all government seems interested in, don’t be surprised when the goose starves to death.

Small startup businesses already have a difficult time getting established in this economy, and the question becomes whether their efforts are helped or hindered by government. Over time, localities have tried a number of different approaches to attracting business like setting up infrastructure for industry on a speculative basis, establishing tax abatement policies, becoming a lender of last resort, and so on. All these can be helpful, although they aren’t exactly making the playing field more level.

Taking the step into entrepreneurship is already stressful enough, so the goal of government should be one of making the process as simple and painless as possible. Fortunes have been built in America based on good ideas, and government should take its place in line for its rightful share instead of taking advantage of those who have a dream.

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  • 2018 Election

    Election Day is November 6 for all of us. However, Delaware still has to get through its primary on September 6.

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