What's the friendliest state in the U.S. to set up shop? Idaho, says a new survey of small businesses.
Thumbtack.com, an online marketplace for local services, and the nonprofit Kauffman Foundation (which aims to foster entrepreneurship) polled more than 6,000 small businesses nationwide. Rankings were based on the companies' ratings of their state's support of small businesses, how easy they think it is to start a new business there and whether they'd encourage fellow entrepreneurs to do the same. The survey did not ask about crime.
The Report Card
Idaho scored an A plus overall, along with Texas, Oklahoma and Utah. No. 5 in the rankings, Louisiana, scored an A.
Idaho also won top marks for having the friendliest tax code and regulatory environment. However, it got a D for the hiring costs of new employees. Texas, Oklahoma and Utah received mostly A's and B's in all of those categories.
And the state least friendly to small business overall? Survey says: Rhode Island. Vermont, Hawaii and California also picked up failing grades, while New York scored a D. One indication that California is perceived as so unfriendly to new small businesses: The state requires occupational licensing in 177 categories, including upholsterers, mixed martial arts fighters and fiberglass laminators. The average nationwide is to require licensing for 92.
Among U.S. cities, Oklahoma City took the prize for "overall regulatory friendliness," including health and safety, environmental and labor rules. Oklahoma City also received top marks for low hiring costs, lighter licensing regulations and good networking programs. Other top cities for small business include Dallas-Fort Worth, San Antonio, Austin and Atlanta.
The five least-friendly cities, according to the study, are Sacramento, San Diego, Los Angeles, Tucson and Detroit.
Taxes and Regulation
The survey suggests it takes more than low tax rates to be considered business-friendly. Entrepreneurs who responded to the survey were nearly twice as concerned with licensing issues, at state and city levels, than with tax rates.
The rankings excluded Alaska, North Dakota, South Dakota, West Virginia and Wyoming, because those states received fewer than 10 responses apiece in the survey.
Earlier this year, a report from the nonpartisan Tax Foundation said Nebraska had the best overall tax policies for new businesses. (The state also figured as particularly friendly to call centers and corporate headquarters.) With help from KPMG, the foundation took data about tax rates, including those from corporate income tax and inventory tax, and new business incentives and attempted to calculate seven "model" firms' tax bills across all 50 states.
The Cornhusker State was followed by Louisiana, Ohio, Wisconsin and Oklahoma. Worst for startups in terms of the tax climate were Maryland, Colorado, Kansas, Pennsylvania and Hawaii.
One state that has been working hard to encourage entrepreneurship is Ohio. The state waives corporate taxes for young companies and offers grants and loans for startups. Still, its actual startup activity is below the national average: 27 out of every 10,000 residents worked on starting a business in 2011, compared with the national average of 32 per 10,000, according to the Kauffman Foundation.
What do you think about the rankings? Would you be more likely to trust the recommendation of a fellow entrepreneur (the Thumbtack/Kauffman survey) or the Tax Foundation modeling?
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