The conscience of a business man

What is preventing you from starting your own business right now and employing all your friends? Is it the corporate income tax rate? Or is it something else?

While some people will tell you it comes down to the great Satan of taxes, a recent survey by the Kauffman Foundation shows that small business entrepreneurs were more annoyed by arbitrary license regulations established by state governments.
 
These licensing rules, while an important signal of accountability in some professions, are largely inefficient or “pants-on-head stupid,” if I were to use the technical term. Matthew Yglesias at Slate discovered several licensing rules that make as much common sense as a diamond-studded condom. For example, he wrote, “New York barbers need 884 days of education and apprenticeship.”

Apparently it takes more than two and a half years of hard work on a simulated cutting-room floor to enter the dangerous profession of barber-shoppery. It’s as if someone in New York state government thought the movie “Sweeney Todd” was actually a documentary. Alternatively, no license is required in Alabama; all you need to become a hair-dresser is skill.

Mitch Daniels and Indiana Republicans will tell you our low corporate tax rate is the solitary reason that drives out-of-state businesses to the crossroads of America, but that is not the whole picture. Our new 6.5-percent corporate tax rate will be one of the slimmest in the country, and when you compare that to the fatties of California (8.84 percent) or Illinois (9.5 percent), it does look pretty sexy.

But if that were wholly true, then Delaware would be an economic powerhouse because it wears a size zero when it comes to corporate income tax rates.
No, I would suggest a more correct reason as to why entrepreneurs are getting big business-boners for Indiana: is its ease of starting a business and low
regulations.

In other words, limited barriers to entry.

 I’m not talking about environmental regulation exclusively; I’m talking about useless licenses — though Indiana is known for its speed of permitting environmental projects such as the Keystone XL pipeline.

Indiana earned high marks in the Thumbtack.com Small Business Survey for its efficient regulations (A-), low hiring costs (A) and flexible licensing (B+).
Other states would be wise to look at Indiana as a solid example of how lowering barriers to entry can spur job growth.

Now, consider tax theory fundamentalists. They would demand the abolishment of the corporate income tax, but they seem to forget that the government must pay for its bills.

Likewise, businesses seem to forget that the government establishes the infrastructure they use to distribute their products.

Some people liken economic theory to the bible, an infallible set of rules broken only by fools and radicals.

 But the fact of the matter is that economic theory has never been absolute, and just like how you cannot take the Good Book completely literally, government cannot take theory absolutely to heart.

If we did take optimal tax theory to its most extreme, there would be sky-high taxes on things like medicine and food and relatively low tax rates on yachts and diamond-studded condoms.

­— nicjacob@indiana.edu