SMALL BUSINESS: THE BEDROCK OF THE KANSAS ECONOMY
by Kenneth Daniel
“There are now millions of nimble capitalists-people putting up their own money, people venturing schemes for financing, and people doing the management of it all-and it is to these latter-day ‘ordinary’ capitalists that we owe our astounding prosperity.”-Mortimer B. Zuckerman of U.S. News and World Report.
Small business is the bedrock of the Kansas economy. It constitutes half the private workforce, half the business wealth of the state, half the gross state product, and far more than half of the taxes paid by businesses to state and local governments.
Small business is the bedrock of state and local revenues. Small business in Kansas, compared to big business and farms, pays a disproportionate share of business income tax, property tax, sales tax, and almost every other type of tax. And it keeps paying even during economic downturns. Small business tax payments are much more predictable and dependable than any other major source of tax revenues.
At the same time, small business doesn’t take much from government. Kansas small business enjoys only a small portion of business development incentives, property tax and sales tax abatements and exemptions, workforce training funds, and other business incentives and tax advantages.
For all its importance to Kansas, small business hasn’t received much respect or nurturing. In 2002, small business was second only to smokers as the target for tax increases. Franchise taxes, sales taxes, fuel taxes, sales taxes on software services, and more—all fall heavily on small businesses.
In 2002, the Small Business Survival Committee (www.sbsc.org) ranked Kansas 32nd among the states as to its climate for small business. In our region, only Nebraska at 34th and Iowa at 44th ranked lower. None of the 2002 tax increases were taken into consideration in the rankings.
In 2000, with 6,483 new employer firm startups, Kansas was 46th in the nation in the rate of employer firm formations. Had Kansas attained just the national average in startups, another 725 employer firms would have been formed in 2000.
Small business is the true bedrock of the Kansas economy. While big business and farm fortunes swing wildly, small business remains comparably steady. Small business keeps people employed, absorbs those laid off from big business, continues to pay taxes, and keeps any profits in Kansas.
At the same time the Kansas Department of Commerce and Housing is congratulating itself on its greatness in keeping and attracting big business to Kansas, Kansas is growing in population at only 1/6 the rate of the U.S. as a whole. Perhaps it is time for Kansas to prime the small business pump for a change.
