Being An Entrepreneur In San Francisco Is A Financially Punishing Experience

Being An Entrepreneur In San Francisco Is A Financially Punishing Experience

Living in San Francisco is a dollar-burning experience. It’s the most expensive housing market in the country, and the cost of living is higher only in Manhattan.

But what about building a business in the city that fancies itself as The City? Don’t even ask.

Nevertheless, we’re here to tell, so here it is: “It Takes More Than $200,000 And Two Years To Open The Smallest Of Businesses In San Francisco,” says UCLA economics professor and Hoover Institution fellow Lee Ohanian.

But even after all the money and time spent, hurdles remain. The “small-business nightmares don’t end once you have opened your doors,” he continues. “Keeping the business open means paying extraordinary taxes and fees, including a requirement that business owners fund every worker’s health insurance at a cost of $2 an hour, even if workers are covered by the insurance of their parents.”

The economist tracked the plight of Jason Yu, who wanted nothing more than to open an ice cream shop in The City. But it turned out, says the San Francisco Chronicle, that he “was no match for city bureaucracy.”

That’s not an indictment of Yu, but of San Francisco, where the process to start a business is so difficult that it seems as if entrepreneurs are “trying to sell used fuel rods from a nuclear power plant” instead of setting up a small, unobjectionable-almost-everywhere-else shop.

In a recent comparison which measured six categories – starting a business, employing workers, getting electricity, registering property, paying taxes, and resolving insolvency – San Francisco was at the bottom of the U.S. rankings in ease of doing business.

It had a better showing in the 2020 edition of “Doing Business North America,” ranking 65th out of 130 cities in Canada, Mexico, and the U.S., 12 places higher than the previous year. But as Ohanian’s article shows, it’s still far from being a business-friendly city.

San Francisco is no outlier. At 65th, it actually finished ahead of the three other California cities in the 2020 report: San Diego (77th), San Jose (79th), and Los Angeles (81st). It’s representative of an overall climate that is best described as hostile to businesses.

As has become its custom, Chief Executive Magazine has just named California the worst state in which to do business. California has earned the bottom ranking in every year of the 17 that the magazine has been compiling the list based on the polling of the nation’s CEOs. That’s been more than enough time for policymakers to adjust, but the most politically powerful are in denial. They see a parade of lists that put the state at the bottom of business-related rankings, and they watch companies run, not walk, away from the heavy tax and regulation burdens they’ve imposed, yet swear that all is well. It’s a self-delusion that can’t go on much longer.

Kerry Jackson is a fellow with the Center for California Reform at the Pacific Research Institute.

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