Business Workshop: It's not taxes, it's complexity

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A recent study by the Ewing Marion Kauffman Foundation and suggests that small business owners are more concerned about the complexity of the tax code and regulations than they are about tax rates.

The study asked about 6,700 small business owners an open-ended question -- "Please let us know any experiences or thoughts you have regarding the ease of doing business in your state." Almost 2,500 replied and their answers were surprising. While 28.9 percent mentioned regulation and licensing as a problem, only 15.5 percent mentioned taxes.

What makes the results so compelling is that the question was open-ended, and did not provide a prompt for a response, much as the question "Are your tax rates too high?" might have done.

Only about half of those mentioning taxes as a concern said they thought taxes were too high, with the rest complaining about the variety of taxes, the complexity of the tax code and the absence of clear, accessible information. Moreover, respondents who felt positively about their states' taxation systems frequently cited the ease of obtaining tax code information and making payments online.

The study reports that a common theme in the comments was that layers of municipal, county, state and federal regulations made it hard to operate a business.

The study makes a number of recommendations on how states can develop a friendlier environment for small businesses, including:

• Simplify tax codes and create more uniformity within the state.

• Simplify the licensing process and unify it where licenses are required in multiple municipalities.

• Develop high-quality online systems to pay taxes, register businesses, comply with regulation and find information.

While the study did not analyze the results by state, it did point out that Pennsylvanian small businesses complained of there being too many taxes, as opposed to too high a tax rate.

-- Ann Dugan
Institute for Entrepreneurial Excellence


Business Workshop is a weekly feature from local experts offering tidbits on matters affecting business. To contribute, contact Business Editor Brian Hyslop at


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