When it comes to startup hot spots, Texas is the place to be.

Not only is the southwestern state home to the tech and media festival South by Southwest, but Texas also was rated the best state to start a business, according to a new report by WalletHub. The personal finance website recently ranked the 50 states across three dimensions: business environment, access to resources, and business costs. WalletHub evaluated those factors based on 26 metrics, including five-year business survival rate, financing accessibility, and labor costs.

Of course, if you're a regular Inc. reader, you already know Texas is tops. Four of its major metropolitan areas were featured on Inc.'s 2018 list of Surge Cities, which highlighted the U.S. hot spots with the most economic momentum for startups. Austin was ranked No. 1 on the list due to its high job creation rate and the plentiful early-stage fundraising deals. What's more, the city has attracted heavyweight transplants from New York City and Silicon Valley, like Outdoor Voices CEO Tyler Haney and startup investor Tim Ferriss, respectively. Dallas, San Antonio, and Houston were also ranked among the top 50 on Inc.'s Surge Cities list.

Still, the state drew some negative reviews; it ranked 30 (out of 50) for business expenses, with higher office-space and labor costs, among others, says WalletHub. A contributing factor to that score could be the state's property taxes, which are among the highest in the U.S. In lieu of both income and corporate taxes, Texas's effective tax rate averages around 1.86 percent, according to financial website, SmartAsset. That's the amount of residential property tax paid on average, as a percentage of home value. The state with the highest property taxes, New Jersey, clocks in at 2.4 percent, while the national average is 1.19 percent. 

California also disappointed in the cost department; it ranked 46 out of 50 on WalletHub's business costs scale. The state did, however, wind up eighth on the full list, as it outperformed with prime access to resources and an ideal business environment. Among other things, the business environment score took into account employee engagement and the number of work hours in a week on average.

States delivering surprisingly high showings include Georgia, Oklahoma, and Florida, which ranked third, fifth, and sixth, respectively. Georgia and Florida ranked well with thriving business environments, while Oklahoma boasts the lowest business costs of the bunch.

Bringing up the rear are Rhode Island, New Jersey, and New Hampshire, which had high labor costs, the lowest availability of human capital, expensive office spaces, and short work weeks. 

Published on: Jul 8, 2019