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Minnesota gets dismal score for entrepreneur-friendly policies

Minnesota ranked near last in yet another report on business-friendly tax and regulatory policies.

The Small Business & Entrepreneurship Council (SBE) on Thursday released its annual index that ranks states on policy measures and costs that impact small businesses and entrepreneurship, and Minnesota just cleared the bottom five, ranking 45th in the country.

The SBE bills itself as a nonpartisan, nonprofit advocacy and research group that promotes small businesses and entrepreneurship.

The list analyzes tax, regulatory, and government spending policies across the country and determines which states, according to the SBE’s measures, have the most “entrepreneur-friendly policies.”

The top entrepreneur-friendly 15 states, in order, are: South Dakota, Nevada, Texas, Wyoming, Florida, Washington, Alabama, Indiana, Ohio, Utah, Michigan, North Dakota, Arizona, Colorado, and Virginia.

In contrast, the 10 states with the least-friendly policy environments for small businesses and entrepreneurs, according to the study, are: Rhode Island, Connecticut, Oregon, Iowa, Maine, Minnesota, Hawaii, New York, Vermont, New Jersey, and California, which ranked in last place.

The full list can be seen here and an interactive map of the different states can be seen here.

Of the 47 measures that determined the SBE’s rankings, the organization said 22 pertain to taxes, 14 relate to regulations, five deal with government spending and debt issues, and the rest gauge the effectiveness of “various important government undertakings.”

The SBE tallied all the measurements and added them together to reach an overall score. According to the list, the lower the score, the lighter the governmental burdens, and the better the environment for entrepreneurship.

The top state, South Dakota, received a score of 34.6, while the bottom state, California, received a score of 113.6. Minnesota, with a score of 103.5, was among seven states with a score that exceeded 100.

The SBE also researched population growth among the top 25 “business-friendly” states versus the bottom 25 and determined that the top states saw a gain of 2.79 million, versus a gain of 1.77 million in the bottom states—meaning the top states grew at a 46 percent faster pace.

The report follows a similar business climate study in October, in which the Tax Foundation ranked Minnesota the fourth-worst state for business taxes.

However, both of those reports differ dramatically from a list Forbes magazine released in September, which ranked Minnesota the eighth-best state for businesses in 2013.

Twin Cities BusinessWhile Forbes also measured similar statistics as the SBE council and the Tax Foundation, such as business costs and regulatory environment, it also factored in quality of life, which managed to pull Minnesota up the list.

Other studies have also provided mixed signals about entrepreneurship in Minnesota. Click here to learn more.

This article is reprinted in partnership with Twin Cities Business.

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Comments (5)

  1. Submitted by Paul Brandon on 12/13/2013 - 04:57 pm.

    So how does Minnesota do

    when one actually looks at the number of small businesses moving into the state, and starting up in the state?
    An educated work force and well supported infrastructure do count for something.

  2. Submitted by William Pappas on 12/14/2013 - 07:10 am.

    business climate for small entrepeneurs

    Right wing talking points. Sounds like the Minnesota echo Chamber of Commerce. States like Texas, Alabam,etc. are now the places small businesses go to start? Not true, especially with respect to the ACA. One of the greatest impediments to small business startups is a business owner’s ability to procure health insurance for themselves. Because the ACA does just that, new startups will increase. As blue states expand the ability of their citizens to procure low cost insurance through state exchanges, red states will lag behind in many categories. Small businesses will have more options to ensure their employees in blue states and citizens as a whole will be less susceptible to the economic hardships imposed by terrrible insurance policies or no insurance at all. Education in states like Alabam and Texas is in a free fall situation with respect to funding. Of course, according to Mahoney’s reporting, that doesn’t factor in business relocation nor does thetransportation infrastructure of the state as well. Hogwash.

  3. Submitted by Bill Gleason on 12/14/2013 - 11:11 am.

    Touting low numbers for some sort of “business climate”

    survey is a fool’s game. This is just more propaganda by lobbying folks who want their client’s taxes cut. The author knew that any reader interested in the topic would know about what Forbes had to say, thus making these phony surveys/polls ridiculous.

    South Dakota the top state? To laugh.

    “Initiative to recruit South Dakota jobs, workers falls short”


    An initiative by Republican Gov. Dennis Daugaard that was intended to draw 1,000 workers to the state has come up far short.

    Daugaard announced the New South Dakotans initiative in January 2012 and predicted the effect would be “enormous.”

    “Those 1,000 families will add more than $120 million to our gross state product, put hundreds of children into our schools, and pay millions of dollars in state taxes,” Daugaard said in State of the State address at the time.

    Since the launch, only 452 jobs were listed through New South Dakotans and many of those were companies seeking multiple hires. Most of those went unfilled, with only 95 workers so far coming to the state and sticking around for the four months required for the state to pay up.


    Unfortunately for South Dakota, and many of the other states listed in the main article, entrepreneurs and workers have to want to be there.

  4. Submitted by Peter Vader on 12/14/2013 - 11:33 am.


    All due respect to this most impressive partnership with Twin Cities Business, any list purporting to speak to business putting South Dakota at 1 and California at 50 is on its face, uh, suspect.

    And speaking of business, what does minnpost imagine the effect on its brand is when it prints – transcribes, rather – claptrap?

  5. Submitted by Mark Byrnes on 12/14/2013 - 02:51 pm.

    I did actually laugh out loud…

    …when I saw that list. Almost every entrepreneur I know goes to the Bay Area or NYC. Start-ups for the most part don’t care about business taxes. The one I worked for, certainly didn’t. The attitude was, we’re all going get crazy rich (we didn’t) so who cares about taxes.

    I can see the point for real small businesses, like lawn care or other service businesses. The problem for start-ups in Minnesota is the VC has been basically non-existent in the last 15 years.

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