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The 10 Best and Worst States for Business

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Business is tough everywhere, but some states are doing a better job of encouraging business growth than others. That’s the contention of Ronald Pollina, author of “Selling Out a Superpower: Where the U.S. Economy Went Wrong and How We Can turn It Around” (Prometheus Books, 2010).

This week, Pollina released his annual list of the 10 worst states for business.  California was ranked as the worst, with Arkansas, Minnesota, Alaska and New Jersey among other states listed. Pollina compiled the list based on 31 corporate site selection factors.

Governors and politicians can do a lot to affect how friendly to business their states are, Pollina said.

“Talk is cheap, and governors need to stop making excuses and stop focusing solely on raising taxes and service-cutting solutions,” said Pollina, owner of a corporate real estate firm in Chicago.  “These are short-term solutions to long-term problems that they refuse to address. They have no effective economic plans. Ask them and politicians say they will increase jobs.” 

Pollina’s list of the 10 worst states for business:

10. Arkansas
9. Minnesota
8. Alaska
7. Kentucky
6. New Jersey
5. Wisconsin
4. Massachusetts
3. West Virginia
2. Rhode Island
1. California

With the exceptions of Alaska and Arkansas, these states face 2012 budget shortfalls of $44.6 billion, or approximately 36 percent of the $125 billion shortfall for all states, Pollina said.

For these states, unemployment ranges from 7.1 to 12.4 percent. They suffer from the “deadly duo” of high corporate taxes (26th to 47th highest nationally) and not being right-to-work states (employee has option of not joining union). Only Arkansas is a right-to-work state.

“There are ways to allow limited right-to-work with only minor compromise by unions, but even this scares the pants off most politicians, better to raise taxes and cut services,” Pollina said.

Combine federal and state corporate taxes and wages and these states rank among the most expensive places in the world for business. This pushes companies offshore if they are to survive in the global marketplace.

As taxes rise and services diminish in these states, their 4 million unemployed will have more company.

Last year, Pollina released his top 10 best states for business list. That ranking was as follows:

1. Virginia
2. Utah
3. Wyoming
4. South Carolina
5. North Carolina
6. Nebraska
7. Kansas
8. South Dakota
9. Alabama
10. Missouri

The study ranked the states based on the same 31 factors controlled by state government, including taxes, human resources, education, right-to-work legislation, energy costs, infrastructure spending, workers compensation laws, economic incentive programs and state economic development efforts.

Jeanette Mulvey

Jeanette has been writing about business for more than 20 years. She has written about every kind of entrepreneur from hardware store owners to fashion designers. Previously she was a manager of internal communications for Home Depot. Her journalism career began in local newspapers. She has a degree in American Studies from Rutgers University. Follow her on Twitter @jeanettebnd.