Taxes, regs clog new biz formation in USA, CA

Taxes, regs clog new biz formation in USA, CA

An alarming new study by the liberal Brookings Institution shows business dynamism has dropped by half from the Reagan Boom of three decades ago. Look at this graph:

Business dynamism Brookings

“Firm entry” means new startup companies. “Firm exit” means the companies are gone. The two lines crossed about 2008, during the time of Republican President George W. Bush. Then “firm exits” kept going upward under Democratic President Obama, outpacing “firm entries,” meaning more businesses were being killed than created.

Partisan control of the U.S. House and Senate also flipped a couple times during this period.

So it’s a bipartisan disaster.

The Brookings study also looked at states. There’s an interactive map here.

California performed among the worst, with a 50 percent decline in new firm creation during the 30 years. This used to be the state of Intel and Apple, of HP and Fairchild Semiconductor.  Sure, we still enjoy such recent startups as Google and Twitter (Facebook started in Massachusetts). But the overall number of startups has gone down.

Yet other states have done but little better. Arch-rival Texas had 36 percent fewer startups. So they can say, “We were terrible, but not as bad as California.”

The “best” state was New York, a high-tax and high-regulation state like California. But its startups dropped “only” 18 percent.

California could lead the way back to leadership in startups by slashing taxes and regulations, by getting rid of zoning to make housing and business property more affordable, by putting a welcoming mat down to business and jobs creation — by all around being friendly toward business instead of clubbing business on the head.

Will it?


Tags assigned to this article:
AppleBrookings InstitutionIntelJohn Seiler

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