Why, you ask? South Dakota is the most entrepreneur-friendly state, says a new survey.
The Small Business and Entrepreneurship Council, a Virginia-based advocacy group, measured the states on 44 different tax and public policy issues for its Small Business Survival Index. It calls the index, which it has produced for 16 years, “the most comprehensive measure of how friendly or unfriendly states are for small business in terms of public policy decisions.”
The report analyzed issues such as sales, personal income tax, personal capital gains tax, gasoline and diesel taxes, per capital state and local government expenditures, and so-called “Amazon” taxes (nicknamed after their most visible target), a.k.a. whether a state requires out-of-state companies with in-state affiliates to collect the state’s sales tax.
“At the federal, state and local levels, the biggest obstacle to entrepreneurship and investment usually is public policy gone awry,” the report said.
The rest of the top five friendliest states for business: Nevada, Texas, Wyoming and South Carolina. According to a separate report, done by the Kauffman Foundation, Nevada had the highest startup rate: 510 entrepreneurs per 100,000 adults.
At the very bottom of the SBE list was New York. California was No. 46, followed by Rhode Island, Vermont and New Jersey. (The District of Columbia ranked 51st, with the report noting that it was not included in studies on state tort costs, eminent domain legislation and highway cost efficiency, “so D.C.’s last place score actually should be even worse.”)
“Elected officials have a clear choice,” said SBE Council chief economist Raymond J. Keating, the author of the study. “They can expand government, tax too much, and over regulate, and thereby restrain entrepreneurship, small business and the economy. Or, they can provide a climate of low taxes, reasonable regulation, and limited government spending, which is critical for economic, income and employment growth.”
South Dakota was also tops on the 2010 list, which measured 38 major government-imposed or government-related costs impacting entrepreneurs and small businesses. (The council expands the scope of the report every year, so it says rankings are not directly comparable.)