Colorado continues to rank among the most business-friendly states in the latest results of an annual comparison of how taxes and government policies affect small businesses and entrepreneurs.
Colorado ranks 10th overall in the 2010 Small Business Survival Index with comparatively low taxes and government spending.
Raymond Keating, the chief economist of the Small Business & Entrepreneurship Council (SBEC) and author of the analysis, said Colorado constitutes an exception to the rule in which many state legislatures have increased taxes to shore up budgets.
“Unfortunately, tax increases, along with new and expanded regulation, do anything but shore up a state’s competitiveness. Instead, they undercut entrepreneurs and investors and therefore work against economic and employment growth,” Keating said.
The SBEC, a small business advocacy group based in Washington, D.C., compiles the index to offer state-by-state comparisons of major government-imposed and government-related costs affecting investment, entrepreneurship and business — and, as a result, the public policy climates for entrepreneurship.
“Policy matters,” Keating said. “Unfortunately, the policies implemented often work against small businesses despite the nice talk nearly all politicians serve up about small business.”
The index takes into account 38 factors to determine an overall rating — including a range of state and local taxes as well as worker’s compensation and utility costs, health insurance mandates and government spending trends.
Colorado consistently ranks among the most business-friendly states in the index. Colorado ranked eighth in the index in 2009 and 2006 and 10th in 2008. The state never has ranked lower than 12th since 2001.
Colorado ranked 10th in the SBEC 2010 Business Tax Index and 15th in the Tax Foundation 2011 State Tax Climate Index.
Colorado ranks high in the Small Business Survival Index in large part because of its comparatively low taxes.
The state imposes a top tax rate of 4.63 percent for corporate and personal income taxes as well as corporate and personal capital gains taxes. That rate ranks as the eighth lowest for corporate income taxes, 10th lowest for corporate capital gains taxes, 17th lowest for personal income taxes and 19th lowest for personal capital gains taxes.
Measured as a proportion of personal income, Colorado imposes the 14th lowest state and local sales, gross receipts and excise taxes and is tied for 19th for the lowest state and local property taxes. The state also offers the 11th lowest adjusted unemployment tax.
The state tax on gasoline as the 18th lowest, while the state tax on diesel fuel comes in at the 15th lowest.
Colorado ranked even better, though, at seventh in an analysis of state and local government spending trends from 2003 and 2004 to 2007 and 2008. The state fared less well in a tie for 23rd in a measure of state and local government spending per capita for 2007 and 2008. The state tied for 19th in a measure of government employees per 100 residents.
Colorado fared worst in the 2010 analysis in a measure of state-imposed health insurance mandates. The state came in at 41st out of the 50 states.
Overall, South Dakota remained atop the ranking of most business-friendly states, followed by Nevada, Texas, Wyoming and Washington. Florida, Alabama, South Carolina and Ohio joined Colorado in the top 10.
New Jersey remained the least business-friendly state. followed by New York, California, Vermont and Maine. Rhode Island, Hawaii, Massachusetts, Minnesota and Connecticut rounded out the bottom 10.
Keating said the results of mid-term elections in November were significant not only in changing the makeup of Congress, but also state legislatures. “While there are expectations for policy changes at the federal level, there should be new policy paths carved out at the state level as well.” The results of the index show which states most need to change policies,” he added. “Establishing a pro-entrepreneur, pro-investment policy climate is critical to a healthy economy and to sound government budgeting.”