Special Report

The Best (and Worst) States for Business

horse rural farm with mountains and clouds in Montana
Source: Thinkstock

31. Montana
> 1-yr. real GDP change: 2.0% (18th highest)
> Avg. salary: $40,182 (4th lowest)
> Adults w/ bachelor’s degree: 30.6% (20th highest)
> Patents issued: 142 (8th lowest)
> Working-age population chg. 2010-2020: +1.8% (22nd lowest)

Although Montana spends just $10,189 per mile on its highways — the third least in the country — only 4.0% of its roads are considered to be in poor condition, much less than the 11.2% of roadways nationwide. The trucking industry lost an estimated total of $124.9 million due to congestion on Montana roads in 2016. At $14,742 lost per mile, the fifth least of any state, Montana roads are some of the most trucking-friendly in the country. The state is also friendly to commuters. The average worker in Montana has an 18 minute commute, the third shortest of any state.

While solid infrastructure may benefit business climate in the state, lack of innovation may be a hindrance. There were just two venture capital deals made in the state in 2014, each worth considerably less than the average across the nation. Further, just 14 patents were awarded per 100,000 residents, roughly one-third the national average.

Oil infrastructure at Prudhoe Bay
Source: Thinkstock

32. Alaska
> 1-yr. real GDP change: -0.6% (2nd lowest)
> Avg. salary: $57,740 (7th highest)
> Adults w/ bachelor’s degree: 29.7% (24th highest)
> Patents issued: 40 (the lowest)
> Working-age population chg. 2010-2020: +5.6% (18th highest)

Business owners and operators pay more for basic needs in Alaska than in many other states. Only five states have higher commercial real estate costs than Alaska, and for the average business, electricity costs 18 cents per kilowatt-hour, more than in all but two other states. With the ongoing decline in the price of oil, the high cost of electricity could be the least of Alaska’s problems. The drop in oil prices has created a multi-billion dollar budget deficit for the Alaskan government, which collects 90% of its revenue through the state’s oil industry. The oil-dependent state is one of only three to report economic contraction in 2014.

With its traditionally profitable oil sector, Alaska has had one of the most business-friendly tax policies. In fact, the state levies no sales tax and every Alaskan has for decades been entitled to an annual state pay-out from the government. With the decline in oil prices these policies will soon no longer be sustainable, according to state officials.

New York City, Manhattan
Source: Thinkstock

33. New York
> 1-yr. real GDP change: 0.9% (11th lowest)
> Avg. salary: $66,774 (the highest)
> Adults w/ bachelor’s degree: 35.0% (9th highest)
> Patents issued: 8,464 (3rd highest)
> Working-age population chg. 2010-2020: -1.4% (9th lowest)

More than 40% of the New York state population lives in New York City. This dense clustering of population and businesses attracts a number of highly skilled professionals and facilitates the sharing of technologies and ideas. New York City’s business environment may explain why the state as a whole has one of the most entrepreneurial climates in the country. There were 462 venture capital deals in New York state in 2014, the second most of any state in the country.

However, high cost of living and high business expenses likely hinder commercial activity in the state. State and local taxes amount to 12.7% of income per capita in New York, the largest tax burden nationwide. Goods and services cost 16 cents more on the dollar in New York than they do on average across the country, a higher markup than in any state other than Hawaii. Commercial real estate in New York is also far more expensive than in most states.

St. Louis, Missouri
Source: Thinkstock

34. Missouri
> 1-yr. real GDP change: 1.7% (25th lowest)
> Avg. salary: $46,582 (21st lowest)
> Adults w/ bachelor’s degree: 27.8% (20th lowest)
> Patents issued: 1,082 (24th highest)
> Working-age population chg. 2010-2020: +2.4% (25th lowest)

The number of private sector businesses in Missouri grew by 2.4% in 2014, versus the less than 1% growth reported by most states. Beyond this encouraging growth, however, there are few indications that Missouri is much better than other states for business. The number of patents awarded per capita in a state is one indication of a healthy labor force and thriving business environment. In Missouri, just 17.8 patents were awarded per 100,000 people in 2014, one of the lowest such figures and well below the average of 43.6 per 100,000 people nationwide.

Businesses operating in Missouri benefit from a very low cost of living, on the other hand. Goods and services in the state cost 11% less on average than they do across the nation.

Oklahoma City, Oklahoma Aerial View
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35. Oklahoma
> 1-yr. real GDP change: 2.2% (17th highest)
> Avg. salary: $45,045 (17th lowest)
> Adults w/ bachelor’s degree: 24.6% (8th lowest)
> Patents issued: 532 (18th lowest)
> Working-age population chg. 2010-2020: +5.5% (19th highest)

Businesses in Oklahoma benefit from one of the lowest corporate tax rates in the country. Additionally, as a right-to-work state, a relatively small 5.6% share of workers are unionized, which allows businesses greater control over worker wages and benefits.

Still, conditions in Oklahoma are far from ideal for business. Only 24.6% of adults in the state have at least a bachelor’s degree, and 8.1% have a graduate or professional degree, each among the smaller shares of any state. Partially as a result, businesses in Oklahoma are more likely to have problems finding qualified labor than the average business nationwide.