How do American entrepreneurs decide where to set up shop?
Business creators look at indicators like corporate tax rates and the health of a state’s finances when determining the best location in which to take root. According to a survey published recently by Thumbtack.com and the Ewing Marion Kauffman Foundation, Illinois isn’t quite cutting the mustard.
On a grading scale from A down to F, the two-month long survey of more than 6,000 American small business owners gave Illinois a C. Despite Mayor Rahm Emanuel’s high praise of his city, Chicago received a D.
Another recent survey looked even less kindly on the Land of Lincoln.
24/7 Wall St., a company that provides analysis and commentary for global equity investors, recently posted its list of best and worst-run states.
Illinois took 48th place, ranking ahead of only California and Rhode Island.
24/7 Wall St.’s study reviewed budget deficits, debt per capita and GDP growth to identify how each state is managing its resources. The survey also examined poverty, income, unemployment, high school graduation, violent crime and foreclosure rates to measure if residents are prospering.
Entrepreneurs look at these qualifications, too. And when they see Illinois’ statistics, they head for the hills.
In 2011, Illinois had the fourth-lowest rate of entrepreneurial activity in the nation, with only 200 per 100,000 adults starting a new business, according to the Kauffman Index of Entrepreneurial Activity. In contrast, Arizona had the highest rate of entrepreneurial activity in the nation, with 520 per 100,000 adults starting new businesses.
And the hits haven’t stopped coming in 2012. In the second quarter of this year, private venture capital investment in Illinois companies dropped 19 percent from the same period last year, according to Dow Jones VentureSource.
New business creation is key to Illinois’ economic turnaround. At this point, Gov. Pat Quinn and state lawmakers haven’t taken the steps – or even proposed to take the steps – needed to make our ground more fertile for business development. Quite the contrary, in fact: proposals are in place for adiscriminatory progressive tax, another round of multibillion-dollar borrowing to “pay down the state’s debt” and an increased minimum wage.
Lawmakers in Illinois – even Democrats – should care about the state’s lack of appeal to entrepreneurs. After all, without businesses and consumers, who would they tax?
Entrepreneurs have already been hit with the 2011 corporate income tax increase, which bumped up the total rate to 7 percent from 4.8 percent. Add to that the corporate personal property replacement tax of 2.5 percent and the total corporate tax rate becomes 9.5 percent. Illinois workers were also hit with a 67 percent income tax rate increase. This 2011 tax hike is supposed to be a temporary bump, but many lawmakers are pushing to make these rates permanent.
Illinois needs to apply policies that make it easy for businesses to thrive here. The best way to help the poor and disadvantaged is to foster a dynamic and prosperous economy that’s inviting to job creators. The state should be making it easy to create jobs – not through corporate welfare, but through lower taxes, more efficient regulations and less red tape.