Oregon Among Worst States for Small Business

Thursday, January 29, 2015

Joanna Evoniuk, GoLocalPDX Contributor

Oregon is one of the least friendly states in the country for small businesses, according to a new ranking released by Small Business Policy Index.

The state was ranked as the 6th worst in the nation by the index that weighed issues such as taxes, regulations, government spending and debt.

“Oregon is pretty good at nurturing startups, but once they get started it hits them in the head with a hammer,” said Brian Vierra, a venture catalyst at Economic Development for Central Oregon. “Once they start making money, they get hit with all the regulations.”

Small business owners in Oregon feel they could get greater support from the state, according to a 2014 survey by the website Thumbtack.

"Creating a business climate that is welcoming to small, dynamic businesses is more important than ever, and Oregon has more to do to get there," said Jon Lieber, chief economist with Thumbtack.

South Dakota was ranked as the friendliest state for small businesses, followed by Nevada and Texas. California came in at the bottom of the list.

Oregon received the low rankings due to the state's individual capital gains and personal income tax rates. Up to 9.9 percent of someone’s personal income can be taxed in the Beaver State, the third highest percentage in the nation.

Vierra said that when businesses consider where to locate, personal income tax is one of the key factors they consider.

“For attracting talent, [personal income tax] stands in the way. Businesses love a choice,” Vierra said.

California had the highest personal income tax of 13.3 percent, which may help some businesses who want to settle on the West Coast pick Oregon, according to Vierra.

One area Oregon received high marks for was wireless taxes, sales taxes, and gross receipts and excise taxes, which companies pay on revenue. The state led the nation in both categories. Oregon is one of five states that has no sales tax.

Seasons Koll is the owner of Presents of Mind, a north Portland boutique. She said although Oregon’s high property taxes are frustrating, it is better than the alternative.

“A sales tax and dealing with it on a day-to-day basis would be far worse,” Knoll said. “Better one than the other.”

Startups
Oregon does have incentives geared towards startup companies to help support their launch and growth, according to Vierra. For example, the Oregon Investment Advantage program removes the state business tax liability for new or freshly-located Oregon startups during their first few years of operations while the Entrepreneurial Development Loan Fund supplies them with loans up to $50,000 at fixed interest rates for five years.

Knoll is pleased with the state’s efforts to help startups, but would like to see more programs that give small business and entrepreneurs a leg up.

“Everything we can do it make it easier to be self sufficient is important,” Knoll said.

New state and federal legislation went into effect this year will have an impact on the small business community. Starting in January 2015, Oregon’s minimum wage rose to 15 cents to $9.25 an hour, the second highest minimum wage in the nation. A mandate from the Affordable Healthcare Act also went into effect on Jan. 1, requiring small businesses of 100 employees or more to offer health insurance for their employees.

Related Slideshow: Slideshow: The 14 Biggest Business Stories of 2014

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