Survey says: Pennsylvania needs to treat small business better


By Andrew Staub | PA Independent

Last week, told the story of Brandon Spencer, a small business owner who’s hoping the borough council in Hanover, Pa., doesn’t cripple his arcade with an expanded amusement tax.

“It’s not like I’m a multimillionaire,” Spencer said, adding the tax could cost him up to $6,000 if applied to his business.

It’s another example in which government isn’t exactly cuddling up to small business — even one that’s helping revitalized a sleepy downtown. And it’s not just Spencer who’s dealing with an inhospitable atmosphere, according to a new survey.

As a whole, Pennsylvania scored abysmally in the Small Business Friendliness Survey that was conducted in partnership with the Kauffman Foundation and released this week. The Keystone State received a D, and scored no better than a D+ in every categories, including ease of starting a new business (D+), tax code (D) and ease of hiring (F).

“After a two-month survey of thousands of small business owners nationwide, we’ve heard directly from Pennsylvania’s small businesses that the state could do more to support them,” Jon Lieber, the chief economist of Thumbtack, said in a news release. “Creating a business climate that is welcoming to small, dynamic businesses is more important than ever, and Pennsylvania’s small businesses think the state could do a better job.”

BAD FOR BUSINESS: A new survey found that small business owners in Pennsylvania believe the state isn’t exactly friendly to their cause.

Thumbtack, a website that connects consumers with local professionals — like photographers or moving companies to name a couple examples — has conducted the survey three years running.

Pennsylvania’s been tracking downward since it received a C for overall friendliness in 2012, the inaugural year of the survey. The state dipped to a D+ the next year and has fallen again in 2014.

Kevin Shivers, executive state director of the National Federation of Independent Business in Pennsylvania, said he was “perplexed” about Pennsylvania’s ratin, especially because neighboring Maryland fared better after raising its income, gas and sales taxes, among others.

Shivers pointed out that Pennsylvania recently passed a law exempting many small businesses from the inheritance tax, gave them more say in the rulemaking process and hasn’t raised taxes in recent years.

In December, the Council on State Taxation named Pennsylvania as “top-ranked” and the “most improved” when it comes to tax administration. That doesn’t correlate with the Thumbtack survey, Shivers said.

“This, to me, seems to be like an aberration,” Shivers said.

The full methodology and analysis of the survey was not immediately provided for review, but anonymous quotes from business owners in the Pittsburgh and Philadelphia regions provided a glimpse of the rationale.

Business owners complained about too much regulation, high taxes and “useless paperwork.” In one case, a music teacher in Philadelphia surprisingly had to deal with zoning regulations.

“I offer one-on-one guitar lessons in my home and actually needed to be zoned for this,” the unnamed business owner said. “While I am appreciative of being able to receive zoning, I was given a 5 year zoning permit and will need to reapply in a few more years again and rehire an attorney for this.”

A few other responses also indicated that perhaps the root issues could be found at the local level. One Claysville business owner complained about a city tax that discourages small businesses. A building engineer in Philadelphia also noted the city’s net profit tax as a barrier.

An owner of a nonprofit also spoke of burdensome bookkeeping and fundraising regulations from the federal level.

Some responses were more cynical.

“It’s very easy to do business in PA if you have the money to buy off the governor, everyone else is out of luck,” a Pittsburgh photographer and designer said.

But even though Pennsylvania’s grade won’t earn a prime place on the refrigerator, there were still a handful of states that scored lower. The bottom of the class included Rhode Island, Illinois, California, Connecticut and New Jersey.

Utah, Idaho, Texas, Virginia and Louisiana scored the highest in the survey.