Confronted by a tough economy, Minnesota Governor Tim Pawlenty (R) has an interesting idea – tax relief business.
As reported on TwinCities.com on January 16, Pawlenty called for a variety of business tax cuts in his State of the State address.
The key measures were reducing the corporate income tax rate from 9.8 percent – which is third highest among the 50 states – to 4.8 percent and allowing businesses to expense the cost of capital expenditures in the year the assets were purchased.
These would go a long way in boosting business and investment in Minnesota – though his proposed six-year phase-in on the corporate tax cut is way too long, and will only serve to delay the economic benefits.
Other seemingly more targeted measures included $50 million in small business tax credits; a 25 percent refundable tax credit for small-business owners that reinvest in their firms quickly; and a capital gains exemption for qualifying investments in small businesses.
On the “Small Business Survival Index 2008,” which ranks the states according to their public policy climates for entrepreneurship, Minnesota came in at a dismal 46th. These Pawlenty tax cuts would clearly improve the frigid policy climate for business in Minnesota.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
Showing posts with label state climate for business. Show all posts
Showing posts with label state climate for business. Show all posts
Friday, January 16, 2009
Thursday, December 11, 2008
California’s Real Emergency
Early this month, California Governor Arnold Schwarzenegger declared that the state of California was in a budget emergency.
On December 10, the Los Angeles Times reported: “Gov. Arnold Schwarzenegger announced this morning that the state's financial crisis has worsened substantially in recent weeks, with the projected budget deficit growing by another $3.6 billion. The news from the governor, delivered in a hastily arranged press conference, comes as lawmakers have yet to heed his call to address the problem in emergency sessions of the Legislature.”
Unfortunately, California’s Republican governor is looking to increase taxes as part of his budget remedies. On December 2, the Times noted: “Republican lawmakers, who last week blocked a Democratic proposal to cut billions of dollars from schools, healthcare and welfare programs while tripling the vehicle license fee, quickly reiterated their opposition to any new taxes, which both Schwarzenegger and Democrats say are indispensable. Democratic legislators again dismissed some of Schwarzenegger's proposals to ease labor rules on business in order to boost the economy… Assembly Republican leader Michael Villines (R-Clovis) rebutted Schwarzenegger's criticism that lawmakers are too rigid, saying in a statement that his party's anti-tax stance ‘is not blind ideology . . . but our sincere belief that higher taxes will hurt the economy and lead to more uncontrolled spending.’”
When you look at the realities of California, it’s pretty hard to argue against Assemblyman Villines. Indeed, higher taxes will make a very bad situation in California far worse.
The real emergency for the state is spelled out by its ranking on the “Small Business Survival index 2008,” which ranks the states according to their public policy climates for entrepreneurship. Quite simply, California has one of the worst climates in the nation – ranking 49th in the nation, with only New Jersey and the District of Columbia faring worse.
California’s woes include the highest personal income and individual capital gains tax rates in the nation; the highest gas and diesel taxes; very high corporate income and capital gains taxes; the imposition of alternative minimum and death taxes; a high state minimum wage; a large number of health care mandates; high electricity and workers’ compensation costs; high per capita government spending and a high rate of increase in government spending over the past six years; and a poor ranking in terms of highway cost effectiveness.
Tax increases should be the last thing that California’s governor and legislators should be thinking about, and instead, they need to find ways to rein in the size and scope of government.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
On December 10, the Los Angeles Times reported: “Gov. Arnold Schwarzenegger announced this morning that the state's financial crisis has worsened substantially in recent weeks, with the projected budget deficit growing by another $3.6 billion. The news from the governor, delivered in a hastily arranged press conference, comes as lawmakers have yet to heed his call to address the problem in emergency sessions of the Legislature.”
Unfortunately, California’s Republican governor is looking to increase taxes as part of his budget remedies. On December 2, the Times noted: “Republican lawmakers, who last week blocked a Democratic proposal to cut billions of dollars from schools, healthcare and welfare programs while tripling the vehicle license fee, quickly reiterated their opposition to any new taxes, which both Schwarzenegger and Democrats say are indispensable. Democratic legislators again dismissed some of Schwarzenegger's proposals to ease labor rules on business in order to boost the economy… Assembly Republican leader Michael Villines (R-Clovis) rebutted Schwarzenegger's criticism that lawmakers are too rigid, saying in a statement that his party's anti-tax stance ‘is not blind ideology . . . but our sincere belief that higher taxes will hurt the economy and lead to more uncontrolled spending.’”
When you look at the realities of California, it’s pretty hard to argue against Assemblyman Villines. Indeed, higher taxes will make a very bad situation in California far worse.
The real emergency for the state is spelled out by its ranking on the “Small Business Survival index 2008,” which ranks the states according to their public policy climates for entrepreneurship. Quite simply, California has one of the worst climates in the nation – ranking 49th in the nation, with only New Jersey and the District of Columbia faring worse.
California’s woes include the highest personal income and individual capital gains tax rates in the nation; the highest gas and diesel taxes; very high corporate income and capital gains taxes; the imposition of alternative minimum and death taxes; a high state minimum wage; a large number of health care mandates; high electricity and workers’ compensation costs; high per capita government spending and a high rate of increase in government spending over the past six years; and a poor ranking in terms of highway cost effectiveness.
Tax increases should be the last thing that California’s governor and legislators should be thinking about, and instead, they need to find ways to rein in the size and scope of government.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
Wednesday, September 17, 2008
California’s Ongoing Budget Mess
In California, it seems that no one is really serious about getting the state budget under control, or about improving the state’s business climate. Keep in mind that California came in 49th among the 50 states and District of Columbia on the 2007 “Small Business Survival Index,” which ranks the states according to their public policy climates for entrepreneurship and small business.
The legislature finally came to a budget agreement after being 78 days left. But Governor Arnold Schwarzenegger doesn’t like the deal, and has pledged to veto it. And if legislators override the budget veto, Schwarzenegger has promised to veto hundreds of other bills.
Wow.
Well, which side is right? As it turns out, neither.
Consider the following from a September 17 Los Angeles Times report:
Schwarzenegger was seeking an increase in the sales tax. Meanwhile, the legislature’s budget plays accelerates tax collections, and leaves in place the threat of big tax increase down the road.
If California’s elected officials were honest and courageous, they’d tell the truth that California has a spending problem. Particularly with some of the highest income taxes in the nation, the state certainly does not suffer from some kind of tax shortfall.
As long as California persists with government at these levels, every economic slowdown or downturn will result in massive budget shortfalls, accompanied by the threat of making the state’s tax system even less competitive than it already is.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
The legislature finally came to a budget agreement after being 78 days left. But Governor Arnold Schwarzenegger doesn’t like the deal, and has pledged to veto it. And if legislators override the budget veto, Schwarzenegger has promised to veto hundreds of other bills.
Wow.
Well, which side is right? As it turns out, neither.
Consider the following from a September 17 Los Angeles Times report:
Schwarzenegger had warned lawmakers before they passed the spending plan, which was 78 days late, that he would reject it if it did not include three provisions to ensure the state a reliable rainy-day fund for times of fiscal trouble. This year, California has developed a $15.2-billion budget gap.
The Legislature agreed to two of his three requests, but balked at putting more restrictions on lawmakers' ability to raid the state's reserves…
By borrowing billions of dollars from taxpayers, their plan would avert deep program cuts as well as a multibillion-dollar tax increase that Democrats and Schwarzenegger had advocated.
The borrowing would consist of accelerated tax collections from individuals and businesses, taking cash now that otherwise would not come in until next year. That leaves a big hole for next year.
Schwarzenegger said the plan "takes our problems and makes them even worse. . . . The way this budget is right now, we will need a huge tax increase next year or to cut education severely."
Schwarzenegger was seeking an increase in the sales tax. Meanwhile, the legislature’s budget plays accelerates tax collections, and leaves in place the threat of big tax increase down the road.
If California’s elected officials were honest and courageous, they’d tell the truth that California has a spending problem. Particularly with some of the highest income taxes in the nation, the state certainly does not suffer from some kind of tax shortfall.
As long as California persists with government at these levels, every economic slowdown or downturn will result in massive budget shortfalls, accompanied by the threat of making the state’s tax system even less competitive than it already is.
Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council
Wednesday, July 09, 2008
Making California Even More Taxing?!
California has one of the worst public policy climates for entrepreneurship and small business in the nation. On the 2007 “Small Business Survival Index,” for example, California ranked a dismal 49th. Only New Jersey and the District of Columbia were more costly in terms of taxes, regulations, spending and other government-imposed or related costs.
But apparently Democratic legislators want to make matters even worse for California’s entrepreneurs and investors, and therefore, for the state’s economy in general.
The Los Angeles Times reported on July 9 that “Democratic lawmakers presented a plan late Tuesday night to impose $9.7 billion in new taxes on the wealthy and corporations to avoid the cuts to government services in Gov. Arnold Schwarzenegger's budget plan.”
Later, the story said: “Income taxes on families earning more than $321,000 would go up by 7.5%. Joint filers earning more than $642,000 would see an 18% hike.”
It was reported that Republican state legislators and Governor Arnold Schwarzenegger are opposed to tax increases. Republicans do have enough votes to block the budget from passing.
Keep in mind that California already imposes the highest personal income and individual capital gains tax rates in the nation. The story closed with the following point: “The wealthy ‘aren't locked in to being here in California,’ said Senate Budget Committee Vice Chairman Bob Dutton (R-Rancho Cucamonga).”
Indeed, California’s public policy climate already sends a very clear signal to entrepreneurs, investors and businesses in general that they are not valued, and they’d be better off moving elsewhere. That grim message would only become clearer if Democratic lawmakers get their way by hiking taxes even more.
But apparently Democratic legislators want to make matters even worse for California’s entrepreneurs and investors, and therefore, for the state’s economy in general.
The Los Angeles Times reported on July 9 that “Democratic lawmakers presented a plan late Tuesday night to impose $9.7 billion in new taxes on the wealthy and corporations to avoid the cuts to government services in Gov. Arnold Schwarzenegger's budget plan.”
Later, the story said: “Income taxes on families earning more than $321,000 would go up by 7.5%. Joint filers earning more than $642,000 would see an 18% hike.”
It was reported that Republican state legislators and Governor Arnold Schwarzenegger are opposed to tax increases. Republicans do have enough votes to block the budget from passing.
Keep in mind that California already imposes the highest personal income and individual capital gains tax rates in the nation. The story closed with the following point: “The wealthy ‘aren't locked in to being here in California,’ said Senate Budget Committee Vice Chairman Bob Dutton (R-Rancho Cucamonga).”
Indeed, California’s public policy climate already sends a very clear signal to entrepreneurs, investors and businesses in general that they are not valued, and they’d be better off moving elsewhere. That grim message would only become clearer if Democratic lawmakers get their way by hiking taxes even more.
Tuesday, January 22, 2008
The States and Business "Survivability"
In this interview with Build Your Business radio host Barbara Weltman, CEO Karen Kerrigan talks about the climate for entrepreneurship in the states and why it matters to small business and the health of state economies. She reviews the current climate of “legislative activism,” and what Governors and legislators should be doing to enable entrepreneurship and vibrant, growing economies.
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