Regionally based Schweitzer Engineering Laboratories (SEL) recently released its 2024 Index of Freedom report. The top five states in the rankings are Utah, Wyoming, Idaho, South Dakota, and Arizona (Montana ranked 9th and Washington ranked 35th). According to SEL:
"This index evaluates the business climate across all 50 states, ranking each based on three critical variables: government efficiency, regulatory freedom and energy resiliency.
This marks the third year that SEL, a manufacturer headquartered in Pullman, Washington, compiled its ranking . . . The SEL Index of Freedom highlights potential advantages or challenges that exist when doing business in each state. This report differs from similar rankings in that energy resiliency significantly influences the score of the state. Affordable and reliable electric power is crucial to business success. The company serves critical infrastructure across the country and around the world, and this unique vantage point consistently highlights the importance of safe, reliable and economical electric power."
While ranking each state, the report focused more closely on the conditions in Idaho and Washington.
"Idaho benefits from less complex state tax and regulatory regimes. The Idaho tax code features a flat 5.8 percent tax on individual and corporate income, and its average combined state and local tax rate is relatively low as well. A less cumbersome and restrictive state regulatory environment, coupled with access to affordable and reliable electric power, make Idaho an attractive place to do business."
"Washington has a relatively complex and restrictive regulatory environment that complicates the ability to do business and grow. Though Washington does not have typical state personal or corporate income taxes, it does levy a 7 percent capital gains tax as well as a gross receipts tax, creating a mixed picture for its state tax structure. Washington is, however, buoyed by the abundance of affordable, clean, and reliable hydroelectric power, which helps keep the lights on for businesses across the state."
SEL's 2024 Index of Freedom report highlights that tax and regulatory burdens matter a lot to employers. A talented and developed workforce, combined with a reasonable tax code is the key to prosperity for a state and business. If states want to attract new business, they need to reduce the burden of high tax rates and regulations, while providing reliable and affordable energy sources. There are several recommendations to help states improve their business climate in our new Policy Manual.
Based on SEL's 2024 Index of Freedom rankings, Idaho, Montana, and Wyoming appear on the right track. Washington, however, has more work to do to become a business-friendly state.