Pennsylvania among the worst states for start-ups, study finds
(The Center Square) – Pennsylvania’s business climate ranks among the 10 worst for startups, according to a WalletHub study published this week.
The Keystone State ranked 43rd in the nation for “best places to start a business” – meaning 42 other states boasted friendlier growth policies, broader access to resources and lower costs.
Researchers measured 28 key indicators of startup success across all 50 states, with additional weights added for the more important factors for survival – including share of engaged workers, average business revenue growth, human capital availability and labor costs, among others.
The results indicate that the 10 best states for startup success are Texas, Georgia, California, Florida, Idaho, Utah, Colorado, North Dakota, North Carolina and Massachusetts.
The 10 worst include Virginia, Delaware, Pennsylvania, Missouri, Alaska, Wyoming, West Virginia, Rhode Island, Connecticut and New Jersey.
Most of Pennsylvania’s indicators fell in the middle of the pack, though falls in the bottom 10 when it comes to the number of start-ups per capita, job growth between 2017 and 2021, working age population growth, corporate taxes and the total effective state and local tax rates on “mature corporate headquarters.”
Chia-Li Chien, an assistant professor at California Lutheran University, said the latter may not factor too heavily into whether businesses choose a location if the other indicators outweigh the higher rate.
“For example, when Amazon selected Crystal City, Virginia, as a second headquarters,” she said. “The available talents were among the top reasons to develop the second headquarter, not necessarily the corporate tax rates.”
Pennsylvania carries the third highest corporate tax rate, at 9.99%, in the nation. The combined state and federal corporate tax rate stands at 28.9%, representing the third highest levy among the 50 states and the District of Columbia, according to a 2020 study from the Tax Foundation.
Gov. Tom Wolf, as part of his now defunct budget proposal, said the state should lower its corporate net income tax rate to 8.99% in 2022, with incremental decreases to 5.99% by 2026.
But a concurrent plan to increase personal income taxes for the top third of earners in the state – which some critics said included more than 866,000 small business – sank the idea.
Martha Mattare, director of the business program at University System of Maryland at Hagerstown, agreed that tax policies don’t necessarily spell disaster or success for a new venture.
“These policies play a part but are not the only consideration when starting a business,” she said. “There are also local policies, incentives, and support systems that play a big role.”
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