Which states love small business?
An exclusive FSB.com list rates states by how low they are on taxes and regulations facing entrepreneurs.
By Christian Zappone, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) -- Its winters may be freezing cold, but South Dakota enjoys the warmest tax and regulatory climate for entrepreneurs, according to exclusive rankings for FSB.com from the Small Business & Entrepreneurship Council.

Other states in the top 10 are: Nevada, Wyoming, Alabama, Washington, Florida, Mississippi, Colorado, Texas and Michigan.


Fortune Small Business's list of who loves small business, released today, is based on the SBE Council's Small Business Survival Index, which rates the 50 states and Washington, D.C. according to some of the major government-imposed or -related costs affecting investment, entrepreneurship, and business.

"Entrepreneurs tend to to well" in South Dakota, said Karen Kerrigan, president and CEO of the SBE Council, a nonprofit group in Washington, D.C., that tends to lobby for the Republican agenda on taxes and regulations. "Obviously [it's] a good policy environment.... It's also a beautiful state, open, with lots of land, and it's affordable to live there. The challenge is leveraging its good environment" to attract more investment.

The places that scored lowest on the list are Washington, D.C., followed by New Jersey, California, Rhode Island, Maine, Minnesota, New York, Hawaii, Massachusetts, Vermont and Iowa.

This year's list measures states on 29 criteria, including tax rates on income, property and capital gains; health-care regulations; crime rates; government spending; bureaucracy; and labor costs. The Index focuses only on public policy measures, so indicators such as workforce availability, education, or skill, or affluence of the population are not included.

Although Washington, D.C., rates lowest, Kerrigan notes the city is undergoing "a renaissance of sorts," with more business development and private-public partnerships taking place, more people moving into the city, and an easier environment for startups, "though once in, the burdens are still pretty heavy."

The states with the lowest tax burden on small business, according to the list are South Dakota, Nevada, Wyoming, Washington, Florida, Mississippi, Alaska, Alabama, Texas and Michigan.

Meanwhile, states with some of the lowest energy costs, include: Kentucky, followed by West Virginia, Missouri, Wyoming, Nebraska, Arkansas, North Dakota, Idaho, Indiana, South Carolina and Virginia.

States were given an energy costs index score for FSB.com's list based on electricity costs and gas prices. Gas prices are not part of the SBE Council's Small Business Survival Index.

Ray Keating, chief economist at the SBEC, cautions that the ratings reflect a state's policy environment, not economic conditions. Michigan, for example, rates relatively high on the list although "their economy has had a tough time," he said. "So people are surprised by the ranking."

"People in New Jersey will be a little surprised," he added. "This is the first year it's dead last among the states. But income taxes went up in the state. It didn't fare too well."

Maybe the pastures of South Dakota will look greener to the nation now.


Who loves small business best? Top 10 states

See the full list

Can small business trust Washington? Top of page

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