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By Mandy Rafool

Online services marketplace Thumbtack recently published the results of their 2014 Small Business Friendliness Survey, conducted in conjunction with the Kauffman Foundation.

The survey asked nearly 13,000 business users of Thumbtack’s website what they thought made for a friendly or effective government, and ranked Utah, Idaho and Texas as the friendliest states for small business in the country. From the responses, Thumbtack drew several valuable lessons for state lawmakers on ideas for appealing to service-oriented micro-enterprises.

The first lesson, according to Thumbtack Chief Economist Jon Lieber, was “no matter what else you do, make things easy.” According to Lieber, the biggest factor that dragged down states’ “friendliness” scores was complicated licensing and tax regimes. The ease of complying with licensing rules was the largest regulatory factor that determined how respondents viewed their state government. States that ranked as having friendlier licensing rules tended to do better than states that didn’t.

Licensing rules mattered twice as much as the rules surrounding taxation, which were the second strongest regulatory determinant of friendliness scores. Interestingly, ease of compliance and understanding the tax code was significantly more important than tax rates—two-thirds of respondents said they felt they paid a “fair share” of taxes, and complicated tax rules tended to drag down overall state friendliness scores far more than high tax rates.

The second lesson is that states where business owners were aware of training and networking programs offered by governments or civic organizations did much better than states that didn’t. Awareness of such programs boosted overall scores by 10 percent.

The reason is that 57 percent of the survey respondents said they had never-before run their own business. These business owners wanted to focus on building their businesses by serving their customers, and said they valued when governments provided training to help them get their business off the ground and understand the rules.

See the results from the survey, including detailed grades for each state.

See information on Thumbtack’s methodology. 

The survey results will be discussed in more detail at the NCSL Legislative Summit in Minneapolis.  NCSL’s Labor and Economic Development Committee is sponsoring a “Small Business Development” session at 2 p.m., Wednesday, Aug. 20.

Mandy Rafool is a tax expert in the NCSL fiscal affairs program.

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This blog offers updates on the National Conference of State Legislatures' research and training, the latest on federalism and the state legislative institution, and posts about state legislators and legislative staff. The blog is edited by NCSL staff and written primarily by NCSL's experts on public policy and the state legislative institution.

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