My new Cato study examines state and local regulations that create barriers to startup businesses. It looks at occupational licensing, marijuana laws, alcohol licensing, minimum wages, rules on home-based businesses, and much else. It ranks the 50 states based on an index of 17 variables. The table shows the overall results.
The state ranking should be considered a rough guide. The results may be biased toward regulatory factors that can be measured with available data. Another caveat is that the climate for startup businesses is affected by numerous factors in addition to regulations, including taxes and labor force quality.
People should use the results of the new study in conjunction with other comparison studies to get an overall sense of the most and least receptive states for entrepreneurs. I suggest:
- Cato Institute “Freedom in the 50 States.”
- Tax Foundation “State Business Tax Climate Index.”
- SBE Council “Small Business Policy Index.”
- Pacific Legal Foundation “50-State Index of Small Business Regulation.”
Some states appear near the top in most of these studies, including Indiana, New Hampshire, South Dakota, and Wyoming. Other states appear near the bottom in most studies, including California, Connecticut, New Jersey, and New York. Policymakers everywhere can learn reform lessons from other states, but the leaders of these low-ranked states need to roll up their sleeves and pursue major government overhauls.
