Special Report

The Best (and Worst) States for Business

Seattle, Washington
Source: Thinkstock

6. Washington
> 1-yr. real GDP change: 3.0% (8th highest)
> Avg. salary: $57,057 (8th highest)
> Adults w/ bachelor’s degree: 34.2% (11th highest)
> Patents issued: 6,378 (5th highest)
> Working-age population chg. 2010-2020: +7.5% (14th highest)

The headquarters of Amazon.com, Starbucks, Costco, and Microsoft, Washington is home to some of the nation’s largest, most profitable, and innovative companies. The state’s record of innovation may be partially due to the 8.3% of the Washington workforce employed in STEM fields, the largest share in the country. Washington’s entrepreneurial climate is also reflected by the high number of investments and inventions made in the state. In 2014, Washington residents closed 116 venture capital deals and won 6,378 patents, or 88 patents per capita — third most of any state.

Washington is also the third largest exporter of all states. Located on the Pacific Coast, roughly one-third of Washington’s exports go to China, Japan, and South Korea. Airplane parts account for 59% of all state exports, a significant portion of which are manufactured by Boeing. Washington’s value of exports per capita, at $11,849, is more than any other state.

Austin Texas
Source: Thinkstock

7. Texas
> 1-yr. real GDP change: 4.8% (2nd highest)
> Avg. salary: $53,769 (12th highest)
> Adults w/ bachelor’s degree: 28.4% (23rd lowest)
> Patents issued: 9,934 (2nd highest)
> Working-age population chg. 2010-2020: +16.1% (4th highest)

Texas is home to several of the nation’s largest metropolitan economies. While depressed oil prices have of late dealt much of the Texas economy a blow, the major metro economies of Dallas, Austin, and other areas have remained strong, providing companies throughout the state a solid climate to do business. The GDP of Texas grew at an average rate of 4.8% each year between 2010 and 2015, the second fastest growth rate behind North Dakota. Texas had 630 building permits issued per 100,000 residents in 2015, also second only to North Dakota, and another indication of economic confidence among businesses operating in the state.

Minnesota
Source: Thinkstock

8. Minnesota
> 1-yr. real GDP change: 1.9% (23rd highest)
> Avg. salary: $52,632 (14th highest)
> Adults w/ bachelor’s degree: 34.7% (10th highest)
> Patents issued: 4,394 (9th highest)
> Working-age population chg. 2010-2020: +1.7% (21st lowest)

Minnesota has some of the best infrastructure of any state. The state has 142 airports, and well-maintained, functional roadways. Just 8.9% of bridges are structurally deficient, the smallest share nationwide. For every mile of interstate in Minnesota, the trucking industry lost an estimated $43,014 in operational costs due to congestion in 2016 — one of the smaller losses from traffic of any state.

Minnesota also has one of the most active entrepreneurial environments in the country. State residents closed 30 venture capital deals in 2014 at an average of $12.4 million per deal — the eighth most of any state. Residents were also awarded an average of 80 patents per 100,000 people, nearly twice the national average. Minnesota’s large share of workers employed in STEM fields, at 6.0%, also helps support the state’s innovative business climate.

Wilmington, Delaware
Source: Thinkstock

9. Delaware
> 1-yr. real GDP change: 2.7% (10th highest)
> Avg. salary: $53,175 (13th highest)
> Adults w/ bachelor’s degree: 30.9% (19th highest)
> Patents issued: 361 (13th lowest)
> Working-age population chg. 2010-2020: +8.9% (9th highest)

Delaware’s regulations are extremely favorable to businesses. The state’s tax structure gives businesses more opportunities for loopholes. For example, state law allows business disputes to be settled swiftly by a judge without a jury, which is considered favorable to businesses. Also, state policies allow businesses to minimize liability. With such favorable regulations, the vast majority of American companies are incorporated in Delaware — a state with the sixth smallest population in the country. According to the state government website, approximately two-thirds of all publicly traded U.S. companies are incorporated in the state.

Rapid City, South Dakota, USA
Source: Thinkstock

10. South Dakota
> 1-yr. real GDP change: 2.6% (13th highest)
> Avg. salary: $39,658 (3rd lowest)
> Adults w/ bachelor’s degree: 27.5% (17th lowest)
> Patents issued: 113 (3rd lowest)
> Working-age population chg. 2010-2020: +3.7% (22nd highest)

South Dakota has one of the the most business-friendly tax climates of any state. The estimated tax burden for state residents, at just 7.1% of per capita income, is second lowest of all states. Low taxes leave residents with more disposable income that can lead to more spending at area businesses. On the Annual Survey of Entrepreneurs just 30.8% of surveyed South Dakota businesses said their profits were hurt by slow sales, the smallest share nationwide. The state has an active economy with a 3.1% unemployment rate, the third lowest in the country. South Dakota’s GDP has grown by an average 2.0% annually since 2010, one of the fastest growth rates of any state.

In the same survey, however, 36.0% of South Dakota businesses cited finding qualified labor as having a negative impact on profits, the largest share in the country. One reason may be the small share of adults with a graduate degree, which at 7.9% is fifth smallest of any state.

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