Which States are Best for Small Businesses?

July 5, 2013

The Kauffman Foundation and Thumbtack.com teamed up a few weeks ago to produce their second annual Small Business Friendliness Survey, ranking the 50 states on the ease of starting a small business, the ease of hiring, health and labor regulations, taxes, licensing, environmental laws, zoning, and training programs. The study draws upon surveys from 7,000 small business owners.

The finding? Utah is the top-rated state and Austin, TX the top-rated city. At the other end were Rhode Island and Newark, NJ.

Some interesting insights about taxes, which as noted were just one feature the survey looked at. While almost no small business owner thinks their tax burden is too low, the percentage who think it's about right or too high varies by ideology and firm size. 45 percent of small business owners think their taxes are too high, compared to 35 percent of independents and just 25 percent of liberals. By firm size, only 31 percent of sole propietors think their burden is too high, business owners with 21 to 50 employees are exactly split on whether their taxes are just right or too high, and a majority of business owners with over 50 employees think their taxes are too high.

While their tax metholodogy is completely different from ours in our State Business Tax Climate Index (they use surveys of small business owners, we use weighted analysis of statutes for all business), there are some similarities. New Hampshire, Nevada, Texas, and Utah are in both of our top ten states for tax friendliness; New York, Rhode Island, New Jersey, and California are in both of our bottom ten. (Alaska, Montana, South Dakota, and Wyoming–four other states in our top ten–are excluded from the Kauffman/Thumbtack.com report, along with Delaware, Mississippi, North Dakota, Vermont, and West Virginia.)

Perhaps the most interesting element of their report is that they include excerpts of comments by the survey respondents. For example, one Warwick, RI business owner complains that he knows his state is one of the most business unfriendly in the country, while a cleaning service owner in Fort Worth, TX praises the state's low taxes.

Check out the study here.


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