The Small Business & Entrepreneurship Council (SBE Council) recently released its 22nd annual look at how public policies in the 50 states affect entrepreneurship, small businesses and the economy. The rankings are based on 55 different policy measures including a wide array of tax, regulatory and government spending measurements.

Of the 55 measures included in the 2018 edition of the Index, 27 are taxes or tax related, 20 relate to rules and regulations, 5 deal with government spending and debt issues, with the 3 remaining measures gauging the effectiveness of important government undertakings.

According to the SBE Council, the Top Ten most business-friendly states are: 1) Nevada, 2) Texas, 3) South Dakota, 4) Wyoming, 5) Florida, 6) Arizona, 7) Washington, 8) Indiana, 9) Ohio, and 10) Utah.

In contrast, the policy environments that rank at the bottom include: 41) Maine, 42) Oregon, 43) Connecticut, 44) Iowa, 45) Vermont, 46) Minnesota, 47) New York, 48) Hawaii, 49) New Jersey, and, last but not least, 50) California!

Some interesting highlights from the report…

State Economic Growth. Real average annual economic growth from 2010 to 2016 among the top 25 states ranked on the 2018 “Small Business Policy Index” averaged 1.77 percent, which was 23 percent faster than the 1.44 percent average rate for the bottom 25 states. So, on average, economic growth performed markedly better during this poor recovery among the top 25 states on the Index compared to the 50-state average (1.60 percent) and compared to the bottom 25 states.

Population Growth. The top 25 states ranked on the 2018 “Small Business Policy Index” averaged state population growth of 6.09 percent from 2010 to 2017 versus only 3.17 percent for the bottom 25 states. That is, the average growth rate was 92 percent higher among the top 25 states versus the bottom 25 states. In terms of total population numbers, the top 25 states saw an increase in population of 11.29 million from 2010 to 2017 versus a gain of 5.0 million in the bottom 25 states. The growth among the top 25 states in terms of total population was 7.09 percent, which was more than double the 3.34 percent for the bottom 25 states.

Population Movements – Net Domestic Migration. Perhaps most telling is net domestic or internal migration, or the movement of people between the states, that is, excluding births, deaths and international migration. It clearly captures people voting with their feet. From 2010 to 2017, the top 25 states on the “Small Business Policy Index” netted a 3.15 million increase in population at the expense of the bottom 25 states, which lost 3.18 million (with the District of Columbia’s gain explaining the difference). For good measure, among the bottom 25 states, 18 lost population to other states, and the bottom 8 states all suffered negative domestic migration.

So, there is a notable difference between the states ranked in the top half versus the bottom half of the “Small Business Policy Index” when it comes to economic growth, population growth, and movement of people among the states. It should not be surprising that, on average, states that impose lower overall governmental burdens on entrepreneurship, business and investment outperform states that impose heavier burdens. When it comes to the economy, quite simply, state policies matter.In summary, states that are “getting policy right” make a big difference in terms of boosting their economy, job creation and competitiveness.

You can access the full report at https://sbecouncil.org/resources/publications/small-business-policy-index-2018/.