5 Best and 5 Worst States for Doing Business
When it comes to picking the best state for a business, a lot of factors come into play -- taxes, regulation, and quality of life for workers are just a few of them. Not surprisingly, business experts have come up with a wide range of sometimes contradictory recommendations about where to set up an office, warehouse, lab, or storefront. Here are 10 states that finished at the top or bottom of recent rankings of the best and worst states for business.
Ranked the best overall by CNBC last year, Minnesota may be the most appealing state for workers -- and what employer doesn't want a happy workforce? The state scored high in quality of life, education, and eight other categories used frequently as selling points in state economic development marketing materials. The Tax Foundation ranks Minnesota 46th when it comes to tax climate, though, so entrepreneurs may still hesitate before opening shop.
The Beehive State topped Forbes' list of business-friendly states for the second year straight in 2015. Utah earned high marks for light regulation and energy costs 23 percent below the national average. Unsurprisingly, that's meant more jobs -- employment has gone up 2.2 percent each year in the past five years. CNBC also gushed over the Utah economy, which is top-ranked in the nation.
Chief Executive magazine surveyed its CEO readership last year and found that the big bosses like Texas best for business. The Lone Star State scored well on metrics ranging from climate to transportation and cost of living and said the state has created 1.2 million net jobs since the 2007 recession, while only 700,000 net jobs were created in the rest of the country. Texas also scored the top slot on MoneyRates.com, which noted that only one state (Louisiana) had fewer incidents of workplace illness, injuries, and fatalities.
Taxation (or the lack of it) is a key factor for business owners when deciding where to base a company, and the Tax Foundation's State Business Tax Climate Index compares the tax systems of all 50 states. The index is designed to show how well states structure their tax systems, and Wyoming gets top ranking for its lack of corporate and individual taxes, as well as having a low sales tax. MoneyRates.com also praises the state for cost-of-living and unemployment rates well below those of most other states.
News and opinion website 24/7 Wall Street gave top honors for best business environment to Utah, but Massachusetts scored a healthy second thanks to the high number of patents awarded (100 per 100,000 state residents in 2014) and number of venture capital investments made that year (393 deals, valued at $11.9 million each on average). A well-educated workforce -- 41 percent of adults have at least a bachelor's degree -- sweetens the deal.
The cost of doing business is cheap in the Mountain State, but multiple outlets have named it the worst state for business. West Virginia ranks at or near the bottom in technology and innovation, access to capital, and the quality of the available workforce, according to CNBC, and Forbes put the state dead last as a result of high unemployment, a poor legal climate, and the lowest college attainment rate in the country (only 19 percent of the adult population has a post-secondary degree).
The Hawaiian islands may be beautiful to visit, but MoneyRates.com says they're one of the worst places to make a living. The primary problem is the high cost of living, plus median home prices of $537,300 (those amazing views don't come cheap). Salaries are about average, and the income tax rate is one of the highest around. Once income is adjusted for taxes and cost-of-living expenses, workers in Hawaii get the equivalent of just 55 cents for every dollar they earn.
This New England entry has risen oh-so-slightly in lists of worst business environments, but its stubborn high unemployment and high cost of living makes any improvement all but imperceptible to residents and easy to ignore by anyone looking for a base of operations. The Ocean State has been in Forbes' worst-five list for seven years in a row, and even CNBC -- which raised it two slots in the most recent list, up from dead last in the nation -- can't help but rate it with the worst infrastructure of all 50 states.
The costs of doing business in the Green Mountain State land it on several lists of bad business environments, with Forbes putting those costs at 13 percent above the national average and Chief Executive sounding the alarm on a new, indexed minimum wage law (projected to be third-highest in the nation in 2018) and proposed tax increases. There's also poor access to capital, according to CNBC -- potentially all reasons for minimal economic growth in recent years. Still, living in Vermont makes for a happy workforce; quality of life is high.
With 24/7 Wall Street projecting a decline of 3.2 percent in the working-age population between 2010 and 2020, business may not find the Big Easy and surrounding areas so easy for staffing -- and, with only 7.8 percent of adults having graduate or professional degrees, applicants may be insufficiently skilled. Nearly 20 percent of the state's population lives in poverty, and Louisiana is one of only two states that have seen a decline in GDP over the past five years. Forbes notes that an expected trade slowdown and lower energy prices have had an impact.