Give small businesses a break from paying start-up costs

As America slowly emerges from the COVID-19 pandemic, small businesses deserve special attention – because they have been particularly affected and because they are vital to job growth. Local governments in Northwest Arkansas can lead nationally by giving new businesses a break from paying start-up costs.

Small businesses make up over 99% of American businesses, and new businesses create virtually all of America’s job growth. Yet 200,000 businesses have closed permanently due to the pandemic, and small businesses have paid the price.

I’m well aware of the stress that small businesses go through because my bakery in Fayetteville has struggled because so many of our customers – restaurants and other food service providers – are struggling. They are trying to run their businesses with limited capacity or with service levels much lower than before the pandemic. Some, tired of fighting, have closed for good. I also hear from other entrepreneurs as an advocate for Right to Start, the national movement to make entrepreneurship a community priority.

A complaint I hear time and time again from entrepreneurs in Northwest Arkansas is that so many government fees essential to starting a business need to be paid up front – before the startup does generate income. Why can’t these fees, they ask, be delayed for a year or two?

Governments would get the same revenues, while increasing the vitality of the business community and increasing the tax base. It would be a win-win for everyone.

Yet government at all levels wants its money up front or quickly. Business licenses and inspections must be prepaid. Business and property taxes must be paid in the first year of operation, although it takes an average of two to three years to become profitable.

This adds to the burden on startups at a time when they can least afford it. This increases the risk of failure, which is detrimental to the long-term interests of the government.

After all, the government has a mandate to increase economic activity and the need to broaden the tax base. New businesses not only increase this activity and the tax base, but they provide much-needed jobs, which in turn increases economic activity and adds to income tax growth.

New businesses also diversify business ownership because they serve the needs of local communities, reflecting local heritage and talent. This in turn diversifies the wealth of the community.

This is all in the government’s interest, but regulators always impose these costs up front. It is time for government at all levels to consider whether its fees and taxes could be better structured to advance entrepreneurship. It is time for the government to ask itself why it is imposing short term barriers on its own long term interests.

Right to Start has created a field guide for policymakers with policy recommendations for local, state and federal government officials. The first of his recommendations for local elected officials is: zero barriers to start. Eliminate all registration and licensing costs to reduce bureaucracy for new businesses in the early days and in their early years.

The Field Guide notes that the average cost to start a business in the United States is $ 725. That’s way more than Canada ($ 166), China ($ 137), and the UK ($ 17). Also over the past 60 years, the percentage of the workforce subject to licensing requirements has increased from 4% to 5% to over 25%.

The government can do more to support local businesses, but this is the issue I regularly hear raised on the streets of Northwest Arkansas. This is the problem that frustrates entrepreneurs trying to improve their lives and their communities.

Local governments in Northwest Arkansas can lead nationally by examining this issue, exploring how to remove unnecessary barriers, and giving entrepreneurs a better chance to grow the economy for the benefit of all. residents of northwest Arkansas.

Editor’s Note: Daymara Baker is the owner of Rockin ‘Baker, based in Fayetteville, a bread supplier for several local food establishments. The opinions expressed are those of the author.

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