The California Small Business Problems and Priorities report is based on the responses of 147 NFIB small business owners to a mail survey conducted from February – April 2024. A national sample of 40,000 members and separate samples of 1,500 for CA, NY, OH, and TX each drawn to create four state specific rankings. Owners evaluated 75 potential business problems individually and assessed their severity on a scale of “1” for a “Critical Problem” to “7” for “Not a Problem.” A mean (average) was calculated from the responses for each problem. Problems are ranked by mean score.

NFIB produced a separate publication for California due to its outsized impact on the U.S. economy and political influence. California holds the top spot for the largest state economy in the country producing over $3.9 trillion dollars in economic output in 2023, 14 percent of total U.S. GDP. Globally, California is the fifth largest economy worldwide. In addition, California is often the pioneer in implementing new tax and regulatory policies impact business activity. These two factors create a business climate very different from most other states in the U.S.

The ten most burdensome problems for small business owners in California are: “Unreasonable Government Regulations,” “Cost of Health Insurance,” “State Taxes on Business Income,” “Electricity Costs (rates),” “Uncertainty over Economic Conditions,” “Cost of Supplies/Inventories,” “Federal Taxes on Business Income,” “Cost of Natural Gas, Propane, Gasoline, Diesel, Fuel Oil,” “Uncertainty over Government Actions,” and “State/Local Paperwork.”

California’s top 10 generally tracks that of the nation with a few exceptions. “State/Local Paperwork ranks 10th for Californians, eight spots higher than the rest of the country where it is ranked 19th. “Unreasonable Government Regulations” ranks as the most burdensome problem for Californians and 7th for the rest of the country. More than one-in-three (34 percent) find it a critical issue compared to 24 percent overall. Owners in California also face a greater state tax burden than the rest of the country as “State Taxes on Business Income” ranks 3rd in California and 9th overall. However, owners in California evaluate “Cost of Supplies/Inventories” as slightly less burdensome with a 6th state ranking compared to 2nd overall.

The severity among some of the survey’s 75 listed business problems diff er substantially between small business owners in California and owners in the rest of the country as shown in Table 16. The ten largest differences in average mean scores between California and the rest of the country occur in the following problems: “Hiring/Firing/Employment Regulations,” “Crime, including Identity Theft, Shoplifting, etc.,” “Environmental Regulations (e.g., EPA),” “Mandatory Family or Sick Leave,” “Health/Safety Regulations (e.g., OSHA),” “Workers’ Compensation,” “Poor Sales,” “Minimum Wage/“Living” Wage,” “Unemployment Compensation,” and “Reducing Energy Use in a Cost-Effective Manner.”

Most notable is that owners in California rank state government regulations higher than the rest of the country, especially those related to employment and the environment. Among the employment regulations, all related problems are significantly more challenging for owners in California compared to the rest of the country.

⁴ Bureau of Economic Analysis, “GDP by State”, https://www.bea.gov/data/gdp/gdp-state.

• “Hiring/Firing/Employment Regulations” ranks 25th in California compared to 49th overall,
• “Mandatory Family or Sick Leave” ranks 45th in California compared to 59th overall,
• “Health/Safety Regulations (e.g., OSHA)” ranks 23rd compared to 36th overall,
• “Workers’ Compensation” ranks 17th compared to 29th overall,
• “Minimum Wage/”Living” Wage” ranks 14th compared to 25th overall, and
• “Unemployment Compensation” ranks 24th among Californians compared to 35th overall.

While many states have enacted higher minimum wage laws over the last four years, California’s most recent increases have been particularly burdensome among small business owners. The state holds a $16 per hour minimum wage overall that began January 1, 2024. However, a $20 per hour minimum wage is now in place for some fast-food restaurants and a minimum wage of $21 per hour for those employees working in healthcare facilities. The minimum wage is scheduled to escalate to $23 per hour starting in 2026 for those employees5. In addition, many cities and locals have exceeded the state’s minimum wage topped by West Hollywood with a minimum wage of $19.08 per hour ⁶.

In a departure from the issues related to labor and the environment, owners in California also evaluate crime as more burdensome than those in the rest of the U.S. About 17 percent of small business owners in the state find “Crime, including Identity Theft, Shoplifting, etc.” a critical issue in operating their business compared to 10 percent of owners overall.

On the other side, California small business owners are less burdened on average than owners in the rest of the country by the following ten problems: “Competition from Large Businesses,” “Credit Card Payment Processing Costs,” “Pricing My Goods/Services,” “Ability to Cost-Effectively Advertise,” “Controlling My Own Time,” “Cyber Crime (viruses, hacking, etc.),” “FICA (Social Security Taxes),” “Cost of Outside Business Services (e.g., accountants, lawyers, consultants),” “Employee Turnover,” and “Keeping Up on Business and Market Developments.”

By all measures, California is a “high tax state” when factoring in the sum of tax payments plus the cost of complying with all the regulations, which is also a tax on businesses. The ranking of business problems reflects these challenges for California small business owners.

5 State of California: Department of Industrial Relations, “Minimum Wage”, https://www.dir.ca.gov/dlse/faq_minimumwage.htm

6 https://www.weho.org/business/operate-your-business/minimum-wage

The Texas Small Business Problems and Priorities report is based on the responses of 227 NFIB small business owners to a mail survey conducted from February to mid-April 2024. A national sample of 40,000 members was drawn with separate samples of 1,500 each drawn for CA, NY, OH, and TX to create four state specific rankings. Owners evaluated 75 potential business problems individually and assessed their severity on a scale of “1” for a “Critical Problem” to “7” for “Not a Problem.” A mean (average) was calculated from the responses for each problem. Problems are ranked by mean score.

The ten most burdensome problems for small business owners in Texas are: “Cost of Health Insurance,” “Uncertainty over Economic Conditions,” “Property Taxes (real, inventory or personal property),” “Federal Taxes on Business Income,” “Locating Qualified Employees,” “Cost of Supplies/Inventories,” “Cost of Natural Gas, Propane, Gasoline, Diesel, Fuel Oil,” “Cost and Availability of Liability Insurance,” “Uncertainty over Government Actions,” and “Electricity Costs (rates).”

Texas’s top 10 generally tracks that of the nation with several exceptions. “Property Taxes (real, inventory or personal property)” ranks 3rd in Texas compared to11th in the rest of the country. The “Cost and Availability of Liability Insurance” ranks 8th in Texas compared to 17th overall. And “State Taxes on Business Income” ranks 39th in Texas and 9th overall.

The severity among many of the survey’s business problems differ substantially between small business owners in Texas and owners in the rest of the country. “State Taxes on Business Income” differed the most by 30 spots in ranking due to Texas’s tax friendly environment. Texas ranks as the 13th best business tax environment in the country according to the Tax Foundation’s 2024 State Business Tax Climate Index. Texas is one of six states that does not impose a state-level corporate income tax and one of seven that does not impose an individual income tax, which is applied for businesses not registered as corporations.

“Workers’ Compensation” ranks 17 spots lower in Texas (46th) compared to the rest of the country (29th). Only 9 percent of owners find this as a critical issue while 22 percent do not consider it a problem at all. Texas is the only state in the United States that does not require its businesses to purchase workers’ compensation insurance. Furthermore, those that choose to purchase workers’ compensation insurance find it relatively inexpensive.
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Texas also has a business-friendly regulatory environment. “Health/Safety Regulations (e.g., OSHA)” ranks 14 spots lower in Texas (50th) compared to the rest of the country (36th). Eight percent of owners regard this type of regulation as a critical issue and 28 percent do not consider it a problem. Similarly, “Minimum Wage/Living Wage,” is the seventh largest difference in rankings between Texas (38th) and the rest of the country (25th). Seventeen percent of owners consider it a critical problem and 24 percent do not consider it to be a problem at all. Texas follows the federal minimum wage law of $7.25 and cities within the state are not allowed to independently exceed the federal minimum wage law.

Small business owners in Texas reported crime-related problems as more difficult compared to the rest of the country. “Cyber Crime (viruses, hacking, etc.)” ranks 19 spots higher on the list ranking 22nd in Texas compared to 41st in the rest of the country. Also notable, the Texas ranking is 10 points higher than it was in 2020. Fourteen percent of owners find cyber crime to be a critical problem. “Crime, including Identity Theft, Shoplifting, etc.” also ranked higher in Texas at the 40th position and ranks 55th in the rest of the country. Fourteen percent regard “Crime, including Identity Theft, Shoplifting, etc.” as a critical problem.

Overall, the rankings of top issues in Texas compared to the U.S. suggest that it is far more business-friendly state than most. This explains in part the wave of businesses and consumers moving to the state from more expensive ones, especially from West Coast states.

The Ohio Small Business Problems and Priorities report is based on the responses of 360 NFIB small business owners to a mail survey conducted from February – April 2024. A national sample of 40,000 members was drawn with separate samples of 1,500 each drawn for CA, NY, OH, and TX to create four state specifi c rankings. Owners evaluated 75 potential business problems individually and assessed their severity on a scale of “1” for a “Critical Problem” to “7” for “Not a Problem.” A mean (average) was calculated from the responses for each problem. Problems are ranked by mean score.

The ten most burdensome problems for small business owners in Ohio are: “Cost of Health Insurance,” “Federal Taxes on Business Income,” “Electricity Costs (rates),” “Cost of Supplies/Inventories,” “Locating Qualifi ed Employees,” “Uncertainty over Economic Conditions,” “Cost of Natural Gas, Propane, Gasoline, Diesel, Fuel Oil,” “Finding and Keeping Skilled Employees,” “Unreasonable Government Regulations,” and “Uncertainty over Government Actions.”

Ohio’s top 10 most severe problems are similar to the overall business population but with slight diff erences in the overall order. Nine of Ohio’s top 10 most severe issues were also listed in the overall top 10 problems, and for two problems the ranking is the same. The “Cost of Health Insurance” ranks as the most burdensome problem for small businesses in Ohio, the same as the rest of the country. The percent of small business owners who consider the cost of health insurance a critical problem is 39 percent, only 2 percentage-points lower than the overall population. The other problem with an identical ranking is “Locating Qualifi ed Employees” which ranks 5th in severity for both groups. Twenty-six percent of small business owners in Ohio believe this is a critical problem, very close to the 28 percent cited by the overall population. The one problem in the top 10 for Ohio fi rms that is not in the top 10 overall is “Finding and Keeping Skilled Employees.” While owners in Ohio rank this problem as 8th, it ranks 14th for the overall small business population.

Small business owners in Ohio struggle more than the overall population with two employee-related problems: “Employee Turnover” and “Managing Employees (e.g., performance, absenteeism, appearance, etc.).” The first, “Employee Turnover” ranks 26th in Ohio compared to 42nd for the rest of the country. Twelve percent of owners in Ohio find this a critical problem. Although not as large of a difference in ranking as “Employee Turnover,” the problem “Managing Employees (e.g., performance, absenteeism, appearance, etc.)” is also more problematic for Ohio fi rms. Small business owners in Ohio rank this problem 34th versus 43rd for the rest of the country.

Problems related to earnings and costs rank less severe in Ohio than the rest of the country. “Workers’ Compensation” ranks 17 positions lower than the U.S. with a ranking of 46th compared to 29th. The percent of firms that cite this problem as critical in the U.S is almost three times more than those in Ohio (5 percent). Another problem that is more severe for firms in Ohio is “Poor Earnings (profits).” It ranks 41st for firms in Ohio, 31st for overall, and 8 percent report it a critical problem. Also notable is “Physical Facilities Costs, such as Rent/Mortgage/Maintenance” which ranks 39th for Ohio compared to 30th for the rest of the country.

The New York Small Business Problems and Priorities report is based on the responses of 285 NFIB small business owners to a mail survey conducted from February to mid-April 2024. A national sample of 40,000 members was drawn with separate samples of 1,500 each drawn for CA, NY, OH, and TX to create three state specific rankings. Owners evaluated 75 potential business problems individually and assessed their severity on a scale of “1” for a “Critical Problem” to “7” for “Not a Problem.” A mean (average) was calculated from the responses for each problem. Problems are ranked by mean score.

The ten most burdensome problems for small business owners in New York are: “Cost of Health Insurance,” “Cost of Supplies/Inventories,” “State Taxes on Business Income,” “Unreasonable Government Regulations,” “Cost of Natural Gas, Propane, Gasoline, Diesel, Fuel Oil,” “Uncertainty over Economic Conditions,” “Electricity Costs (rates),” “Federal Taxes on Business Income,” “Uncertainty over Government Actions,” and “Locating Qualified Employees.” The top 10 issues in New York generally track the overall country, but New York small business owners find taxes and costs of doing business to be higher than the rest of the country.
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New York small businesses find state taxes and local regulatory burdens to be more critical issues than small business owners in the rest of the country. Of the biggest difference in the top 10, “State Taxes on Business Income” is the third most burdensome problem and ranks six spots higher than the rest of the country. Twenty-seven percent of owners find state income taxes to be a critical issue and 4 percent do not find it to be a problem at all. “Unreasonable Regulations” is the fourth most burdensome problem in New York and ranks three spots higher than the rest of the country (7th). Twenty-seven percent of owners find regulations to be a critical problem for their business. Only 5 percent do not consider regulations to be a problem at all.

The biggest ranking differences between New York and those in the U.S. overall are mostly related to employment regulations. “Mandatory Family or Sick Leave” ranks 16 spots higher (43rd) than the rest of the country (59th). Thirteen percent of owners find family and sick leave policies to be a critical problem. “Workers’ Compensation” ranks fifteen spots higher (14th) compared to the rest of the country (29th). Twenty-four percent of owners find workers’ compensation to be a critical problem.

“Unemployment Compensation” ranks 14 spots higher (21st) than the rest of the country (35th). Eighteen percent of owners find unemployment compensation to be a critical issue. The high cost of labor is also a burden for small business owners as “Minimum Wage/“Living” Wage” ranks 10 spots higher (15th) than the rest of the country (25th). Twenty-five percent of owners find the minimum wage to be a critical problem, 6 percentage points higher than in 2020. New York’s minimum wage of $15.00 is the seventh highest in the country. However, the more populace regions of the state hold higher minimum wage laws including New York City at $16.00.

“Hiring/Firing/Employment Regulations” ranks 10 spots higher (39th) compared to the rest of the country (49th). Twelve percent find those employment regulations to be a critical problem.

On the flip side of the coin, “Environmental Regulations (e.g., EPA)” is the largest difference in ranking compared to the overall U.S. by eight spots, 53rd for New York compared to a 45th ranking for the rest of the country. Nine percent of owners find this problem to be a critical problem.