New Jersey’s small businesses need more support from Trenton. This is why | Opinion - Garden State Initiative



New Jersey’s small businesses need more support from Trenton. This is why | Opinion

Danielle Zanzalari, Ph.D. & Eileen Kean   |   June 16, 2023   |   As Seen In Gannett/USA Today Network


It’s a fact that small businesses are the backbone of New Jersey’s economy.  According to data from the U.S. Small Business Administration, small businesses constitute 99.6% of New Jersey businesses and employ 49.2% of our state’s workforce. Despite these impressive numbers, a recent Garden State Initiative report, “New Jersey’s Red Tape & Fees are Hurting Small Businesses.” documents there are clear warning signs for the small business outlook in our state, mostly caused by onerous government taxes, regulation and fees. Thankfully, there are common-sense policy reforms that can reinvigorate small business in our state.

While it’s no secret that New Jersey has offered one of the worst business tax climates in the U.S. for years, in independent studies, the Garden State was ranked the 2nd worst state for entrepreneurship and the 4th worst state to start a business.

The real-world implications of those rankings are borne out in data.

Census data suggests that while business applications are vastly up from the pre-pandemic era, indicating that people do want to start their own businesses in our state. The problem is new business formations, also as measured from the Census, are down. This means that while people are applying for new businesses, it is more difficult to actually become a business in New Jersey.

There are four factors readily identified as hindering small business development in our state:

  • First, it is costly to register or keep a small business or LLC relative to neighboring states. It is more expensive to register as a business compared to New York and Pennsylvania, our immediate neighbors. Delaware is the only neighboring state that is more expensive to start a small business based on filing and annual fees, but businesses can save money opening in Delaware because they do not have state or local sales tax. So, for small businesses that may conduct many sales the higher Delaware registration fee may be worth it relative to paying sales tax.
  • Second, New Jersey has a lack of workers due to laws mandating unnecessary jobs. Small businesses account for 85% of all hiring — an entry point for many workers in the workforce, but there are not enough workers to find to start a business. In our low unemployment environment, reducing red tape could quickly reengage some of our unemployed population back into the workforce.
  • Third, there are laws that make it difficult to start jobs, such as occupational licensing laws. The Institute for Justice reports that 422 calendar days are lost yearly due to burdens for licensed occupations. For example, New Jersey has one of the highest burdens for security alarm installers nationwide and the highest in the region. Security alarm installers in New Jersey must obtain 1,460 hours of education and have four years of experience. New York requires just 81 hours and no experience. Delaware requires simple registration and Pennsylvania does not require a license to offer the services. Similar examples are the lengthy licensing processes for locksmiths.
  • Fourth, ecent legislation has not been supportive of small-business entrepreneurs. Despite a Democratic-controlled Legislature and Senate overwhelmingly passing a bill creating a permanent commission to review regulations and rules on businesses that hurt economic growth, Gov. Phil Murphy vetoed it in 2021. Reviewing burdensome and anti-growth regulations can help minimize the difficulty of operating a small business in our state.