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Tax break: No personal income tax on wages and salaries
Best Places to Launch: Clarksville

While plenty of Tennessee newcomers dream of standing ovations at the Grand Ole Opry, not everyone can be Toby Keith or Faith Hill. But those who are still waiting to make it big can count on keeping more of their paychecks from the day job: Tennessee has no personal income tax on wages and salaries.

Tennessee residents with enough spare cash to invest will take a hit on income from most stocks and bonds. For business owners, the state tax code is a mixed blessing: No personal income tax means paychecks go unencumbered, but sole proprietors with LLCs or S-corps don't get to slip their profits through untaxed. Tennessee levies its 6.5% corporate income on those small businesses.

Retailers also struggle against a high 7% state sales tax. In some areas, local tariffs carry the sales tax rate up to a whopping 9.75%.

Still, as one of just nine states that goes without income taxes on salaries, Tennessee's "live free!" ethos attracts a fair number of entrepreneurs. Kingsport, Tenn., ranked #1 on our list of metro areas with the fastest small business growth rate. -Jennifer Lawinski

NEXT: Utah

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LAST UPDATE: Oct 20 2009 | 9:27 AM ET
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