According to the most recent report from the federal Bureau of Economic Analysis, New Jersey has one of the slowest economies in the United States. Despite doling out millions in tax credits and attempting to stimulate the economy with government spending, New Jersey continues to fall behind its peers.
It’s clearly time we stop treating the symptoms of a bad business climate with Band-Aids like tax credits, and start doing some major surgery on the underlying structural elements of our economy, starting with our legal system.
Why is legal reform key to spurring economic development?
- A state’s litigation climate is one of the top factors business leaders consider when deciding where to locate their business or whether to expand. States with predictable legal systems that discourage abuse allow businesses to more accurately project what future legal expenses will be, allowing them to free up capital for business expansion and job creation. According to the U.S. Chamber’s 2012 State Liability Systems Ranking Study, of our surrounding states, only Pennsylvania is viewed as having a worse legal climate than New Jersey.
- New Jersey also ranks poorly on the Kauffman Index of Entrepreneurial Activity, which measures new business creation across the United States. In the 2014 report, New Jersey is ranked 43. When businesses fear lawsuits, they must be overly cautious about launching new ventures and bringing innovative products to market. Improving the state’s litigation climate would show entrepreneurs and inventors that New Jersey is open for business.
- Contrary to popular belief, most companies being sued are not “deep pockets.” Lawsuits are frequently filed against small businesses, and thus the small business owners who are heavily invested, both emotionally and financially in those businesses. The fear of lawsuits increases the cost of doing business as insurance rates increase and unnecessary precautions eat up capital.
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