NCPA - National Center for Policy Analysis


February 6, 2009

What are the worst states to start a business in?  U.S. News and World Report decided to find the states that offer the least helpful environment, and also do the most to harm businesspeople through interference. 

West Virginia:

  • West Virginia consistently ranks as one of states with the lowest per capita income, so it shouldn't be surprising that the Kauffman Foundation ranks West Virginia 49th out of 50 states in its preparation for the economic trends that will propel entrepreneurs in the 21st century.
  • It's harder to find highly-educated people to hire in West Virginia than in other parts of the country; it ranks last among the 50 states in workers with advanced degrees or some kind of higher education attainment.
  • Perhaps not coincidentally, the state also ranks last in the number of entrepreneurs starting new businesses.
  • Another factor is its high level of taxation; according to the SBEC's index, West Virginia is in the top 20 percent of states based on how high their corporate income and corporate capital gains tax rates are, and in the top 50 percent for individual income and capital gains tax rates.


  • Iowa has relatively low investment in the things that make entrepreneurs succeed and high government interference.
  • For the latter, Iowa has very high capital gains taxes and corporate income taxes, and is also one of the worst states for unemployment taxes on wages.
  • In terms of investment, Iowa is 46th out of the states for adoption of broadband telecommunications services, and the speed of those services.


  • The state government spends a lot of money; from 2000 to 2006, it had the ninth-highest increase in per capita state and local expenditures.
  • Much of that money comes from sales and excise taxes, of which Arkansas has some of the highest in the country.
  • But wherever all this money is going, it does not seem to be making Arkansas a better state for entrepreneurial innovation.
  • It is not attracting knowledge workers -- it ranks last among the states for the educational attainment of recent migrants from other parts of the United States; this relative lack of knowledge workers might be why Arkansas also ranks last for the number of inventor patents per capita.

Source: Matthew Bandyk, "The 7 Worst States To Start a Business," U.S. News and World Report/, February 2, 2009.


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