Want your small business to succeed? Then start it in South Dakota.

According to the Small Business Survival Index 2008 released last month by the Small Business and Entrepreneurship Council (SBEC), South Dakota has the friendliest policy environment for entrepreneurship.

The SBEC’s index is based on the conservative idea that “a state’s economy and competitiveness benefit most from what government does not do.” Translation: the highest rated states have the least impact on your business.

Specifically, the index examines 34 costs on investment and business that are imposed by government directly, such as taxes and regulation, and those that are imposed indirectly, such as a failure to control crime. Of the 34 costs, 16 are specifically about taxes. This includes personal and corporate income taxes, individual and corporate capital gains taxes, individual and corporate alternative minimum taxes, property taxes, sales taxes, estate taxes, internet taxes, gas taxes, and more; painful to read isn't it?

Lower taxes give a state a better ranking on the index; higher taxes hurt the state’s ranking.

Government mandates that the SBEC considers harmful to small business are also factored in. States with a higher minimum wage, paid family leave, and health care mandates are penalized in the index. States that are right-to-work, meaning that employees are not forced to pay dues to unions, are also rewarded with higher scores.

South Dakota sits at the top of the index due to its low overall taxes and per capita government expenditures, few regulations, low electric utility costs, highway cost effectiveness, and the lowest crime rate in the nation.

At the bottom of the index is the District of Columbia, where the SBEC says small businesses are hindered by high taxes and the highest crime rate in the nation. Taxation without representation will do that to you.

Below, we've listed the rankings for your viewing pleasure.

Small Business Survival Index 2008

1. South Dakota
2. Nevada
3. Wyoming
4. Florida
5. Washington
6. Texas
7. South Carolina
8. Alabama
9. Virginia
10. Colorado 
11. Tennessee
12. Georgia
13. Arizona
14. Missouri
15. Utah
16. Alaska
17. Mississippi
18. Ohio
19. Michigan
20. Indiana
21. Oklahoma
22. North Dakota
23. Kentucky
24. Illinois
25. Pennsylvania
26. Wisconsin
27. Louisiana
28. New Hampshire
29. New Mexico
30. Arkansas
31. Kansas
32. Oregon
33. Montana
34. Delaware
35. Idaho
36. Nebraska
37. Connecticut
38. Maryland
39. North Carolina
40. West Virginia
41. Hawaii
42. Iowa
43. Vermont
44. Massachusetts
45. New York
46. Minnesota
47. Rhode Island
48. Maine
49. California
50. New Jersey
51. District of Columbia

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