Pennsylvania appears to have some work to do if it wants to be known as a state that's friendly for business.
The commonwealth this week was ranked near the bottom in WalletHub’s “2019 Best and Worst States to Start a Business” and was ranked third from the bottom for “business environment,” which included the work week, growth in the number of small business and the five-year survival rate for businesses.
The state ranked 22nd for its “access to resources” which included the human capital and the availability of financing. Pennsylvania ranked 37th in “business costs” which included the cost of office space, labor costs, and the cost of living.
State legislators said during a news conference in April that regulations were keeping Pennsylvania “closed for business” and introduced bills aimed at reducing the state’s 153,000 regulations. State Rep. Kate Klunk, R-York compared it to “extreme hoarding” and introduced a bill that would have established an Office of the Repealer to assess the regulations and require agencies to repeal two regulations for every one added. The bill failed to pass the state House of Representatives by a 100-97 margin in April.
Business leaders said at an April news conference that the regulatory environment makes the state a tough one, with some saying it’s easier to make customers happy than the government, said Carl Marrara, vice president of government affairs for the Pennsylvania Manufacturers' Association.
“Our employers are facing an onslaught of regulations from a breadth of departments at the local, state and federal level,” Marrara said. “This great uncertainty in business planning results in companies not growing, expanding, hiring or investing as they could.”
Removing the red tape and bureaucracy needed to start a business could help states, said Jose Gonzales, assistant professor of entrepreneurship at the College of Business Administration at Belmont University in a statement to WalletHub.
“I just recently had a conversation with a business owner who is seriously considering closing her flower business because the frustrating processes she has to follow every month to deal with multiple compliance requirements she is required to follow,” Gonzales said.
A state’s approach to taxes and regulation may have an impact on new businesses but corporate tax rates are not important as most businesses are limited liability companies, said Patrick Gaughan, executive director of the Innovation Practice Center and associate professor of law at the University of Akron. He said he has seen no evidence that tax breaks attract new businesses.
“This might be because most new businesses are first concerned with achieving sustainable profitability,” Gaughan said. “Even cash-flow benefits for tax breaks usually are not realized until the end of the taxable year.”
States should be transparent about regulations, taxes and requirements in order to encourage entrepreneurs to move to their state, Gaughan said.