06/26/2008
CONTACT: Bill Vernon, 617-482-1327 or Jason Brewer, 202-406-4435
BOSTON -- The following statement from Bill Vernon, state director of the National Federation of Independent Business/Massachusetts, may be used in whole or part as an op-ed in your media outlet, or as part of any story you prepare on economic development legislation currently being debated on Beacon Hill. To obtain a headshot of Vernon, please e-mail jason.brewer@nfib.org. Thank you.
The U.S. Small Business Administration has issued a report that confirms what many of us know -- that established small businesses create most of the new jobs in the nation and have done so for several decades.
This finding has real implications for the job growth policies of state and local governments if political leaders are willing to listen.
The study characterizes the 5 percent of companies that account for almost all job and revenue growth in the economy as "high impact" firms. These firms have generally been around for 25 years, are concentrated in high tech but are found across all industry sectors, and exist in every geographical region of the country.
Most importantly, because of the varying nature, size and location of the companies that become "high impact" firms, the authors concluded that determining the factors that led to "high impact" status was not possible.
This would indicate that efforts to target certain industries for special taxpayer-funded benefits are likely to fail as a job creation strategy. If researchers looking back in time cannot determine what factors lead a company to become a job creating "high impact" firm, then state or local government have no basis to accurately predict which businesses in which economic sector will add jobs in the future. Focusing government largesse on certain companies in the form of grants and tax breaks is unfair as well as a fool's errand that will result in some wins and a lot of losses with taxpayers picking up the tab in all cases.
To date, we have seen that the effort to attract the movie business has been successful everywhere except at the state's Revenue Department, where tax subsidies and tax breaks far exceed any additional tax receipts to the state from the movie industry.
Now the state is embarked on a $1 billion program of grants and tax credits for the biotech or life science industry. The state will be in a position of giving economic advantages to certain companies engaged in the biotech industry -- economic advantages that companies outside the industry as well as other industry competitors will not enjoy. Some investments will pay off, but based on the historical evidence, many will not.
Picking economic winners and losers is clearly not a proper role of government in our free enterprise system -- that's what we have venture capitalists for -- and it is certainly not a prudent expenditure of taxpayer funds.
State government has a positive role to play in job creation. That role is to keep costs assessed on businesses by government to a minimum, limit government regulations on the conduct of business to the necessary protection of public safety, and generally create an economic and business climate that will facilitate the ownership and growth of a business.
Keeping costs down, which in Massachusetts means health insurance premiums, unemployment insurance and other payroll taxes, and energy costs, is the fairest and most effective way to encourage economic and job growth. Until our elected officials find the solutions to address these challenges, they should not add venture capitalism to their list of duties.
Bill Vernon is state director of the National Federation of Independent Business, Massachusetts' and the nation's leading small business association.
