The 11th annual "Small Business Survival Index" evaluated each state's public policy climate for small businesses. Rankings were based on 29 major government-imposed or government-related costs, including state and local property taxes, personal income tax, number of health insurance mandates, crime rate, and electric utility costs.
"Governmental costs among the states will have an impact on where people live, work, and start up businesses," Raymond Keating, the SBE Council's chief economist and the author of the study, said in a statement.
Other states that ranked highly include Alabama (No. 4), Washington (No. 5), and Florida (No. 6).
The purpose of the survival index, according to Keating, is to compare each state's tax, spending, regulatory, and litigation burden, so that entrepreneurs can make informed decisions about where best to invest in their small business. Plus, Keating hopes state lawmakers use the list to evaluate their states competitive position.
"State policy makers need to pay attention for the sake of their own state's competitiveness and economy," Karen Kerrigan, the SBE Council's president and CEO, said in a statement.
The survey found that the District of Columbia has the least friendly policy environment for entrepreneurs. Other states deemed unfriendly to entrepreneurs include Rhode Island (No. 48), California (No. 49) and New Jersey (No. 50).
"Ever-mounting burdens placed on entrepreneurs and small businesses by government negatively affect economic opportunity," Keating wrote in the report.