South Dakota Tops List of State Policy Environments for Entrepreneurs

When asked what policymakers can do most for entrepreneurs, sometimes the response has been “get out of the way.” That seems to be the overarching message of the latest report from the Small Business & Entrepreneurship Council.

The report, Small Business Policy Index 2014: Ranking the States on Policy Measures and Costs Impacting Small Business and Entrepreneurship, tracks 42 measures with 33 of them pertaining to taxes and regulations—the fewer, the better.

The index continues to point to South Dakota as the most entrepreneurial-friendly state in the U.S., benefiting most from the lack of individual income tax, capital gains tax, corporate income tax and inheritance tax or “death tax."

“In order to compete for capital, business and human capital, many Governors and state legislatures are pushing forward with policies to improve their tax and regulatory climates,” said Karen Kerrigan, president and CEO of SBE Council.

South Dakota is followed by (in order): Nevada, Texas, Wyoming, Florida, Washington, Alabama, Indiana, Colorado and North Dakota.

The least-friendly state to entrepreneurs? California. The home of Silicon Valley far outpaces New Jersey and New York at the bottom of the list.

While the policy environment doesn’t always line up directly with entrepreneurial activity, there is definitely some overlap. Looking at the 2014 Kauffman Index of Entrepreneurial Activity, South Dakota had one of the highest rates of new business formation in the country. For additional comparisons to the entrepreneurial outputs of the states, visit the KIEA interactive maps.

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mark marich

Mark Marich

Mark Marich is the executive vice president of Global Entrepreneurship Week. Since 1998, Marich has provided communications leadership on several national initiatives and more than 100 public forums covering a wide range of policy issues, including: entrepreneurial growth & economic development; health care; renewable energy; telecommunications; regulatory reform; and, workforce development.