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Study Finds Virginia Business Climate Best in Nation

July 09, 2014

by Rudy Takala

A report released last week assessing state business climates placed Virginia at the top nationally, giving the state a grade of A+.

The study, conducted by the Kauffman Foundation and Thumbtack and reported on in The Economist, examined state business climates by looking at a combination of tax rates, regulatory environment and licensure requirements for low-income occupations. Virginia was just one of two states, along with Texas, to receive the top grade of A+, indicating the best climate nationally for small business owners. Three separate states – Nevada, Utah, and Idaho – received A+ grades for their tax environment.

The enormous growth fostered by Virginia’s free economic climate stands in stark contrast to states with burdensome economic regulatory and tax environments.  Illinois, which received an “F” on the report, saw an unemployment rate of 7.5 percent in May. California, which also received an F, had an unemployment rate of 7.6 percent. Virginia tied with Texas at an unemployment rate of 5.1 percent. Wages in Virginia, at an average of $51,646, also outpaced the national average of $49,289.

The report follows this year’s legislative session, in which legislators prevented Gov. McAuliffe from passing a Medicaid expansion that could cost around $2 billion per year.

While Virginia’s tax and regulatory environment is friendly, research produced by the Institute for Justice and Veronique de Rugy of the Mercatus Center suggests that the Commonwealth’s licensing climate could be improved even more. The research, which looked at 102 low-to-moderate-income occupations, found that Virginia had in place the 11th most burdensome licensing requirements in the nation. Last week’s study found that Virginia required licensing for 45 percent of selected occupations compared to 33 percent in Texas.

Though Texas continues to outperform Virginia in at least one regard, Virginia’s generally free market is continuing to foster prosperity in the state, and Virginians are continuing to fare better than the overregulated and overtaxed residents of states like Illinois and California. This study serves as a reminder to other states that they may look to Virginia as a model of how they can work to improve their own regulatory and tax environments.

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