By Barbara Pruitt | Budget & Tax News

Small-business owners in Utah, Idaho, Texas, Virginia, and Louisiana gave their states the highest rating for friendliness to small business, according to Thumbtack.com, which with the Ewing Kauffman Foundation has released the third annual Thumbtack.com Small Business Friendliness Survey. Small businesses in Colorado Springs, Boise, and Houston gave their cities the highest ratings.

Small-business owners gave California, Rhode Island, and Illinois an "F," by contrast, and Connecticut and New Jersey both earned a "D" grade. Sacramento, Providence, and Buffalo were the survey’s worst-performing cities as rated by their small-business owners.

More than 12,000 entrepreneurs nationwide participated in this year’s survey. The Thumbtack.com Small Business Friendliness Survey is the largest survey of its kind and is the only survey to obtain data from an extensive, nationwide sample of small business owners to determine the most business-friendly locations.

The survey ranked 82 cities and most states on what makes a positive environment for small businesses.

‘Keys are Ease of Compliance’ 

“Creating a business climate that is welcoming to small, dynamic businesses is more important than ever, but rarely does anyone ask small business owners themselves about what makes for a pro-entrepreneur environment,” said Jon Lieber, chief economist of Thumbtack.com. “Thousands of small business owners across the country told us that the keys to a pro-growth environment are ease of compliance with tax and regulatory systems and helpful training programs.”

Some of the survey’s key findings include:

• Small businesses in Texas, Utah, and Idaho have rated their states in the top five every year this survey has run, and California and Rhode Island have ranked in the bottom five every year.

• The friendliness of professional licensing requirements was the most important regulatory issue in determining a state’s overall friendliness to small businesses. Closely following licensing requirements was the ease of filing taxes.

• Tax rates were a less important factor than the ease of regulatory compliance in determining the overall friendliness score of a jurisdiction. Two-thirds of respondents said they paid their “fair share” of taxes— they thought they were neither underpaying nor overpaying.

• Small-business owners who were aware of training programs offered by their government were significantly more likely to say their government was friendly to small business than those who weren’t. Awareness of training programs raised overall scores by 10 percent, as 76 percent of those who said they were aware of government-sponsored training programs for business owners ranked their local government as “somewhat” or “very supportive,” and only 8 percent of these said local government was unsupportive.

• Only 19 percent of respondents said they were prepared for implementation of the Affordable Care Act.

• Female entrepreneurs were more likely than male entrepreneurs to say their state government was friendly to small business, and male entrepreneurs were more likely than female entrepreneurs to have a positive view on the outlook of their state economy.

• Kentucky’s grade was this year’s most improved, jumping from a B- to an A.

‘Critical to Economic Growth’ 

“It is critical to the economic health of every city and state to create an entrepreneur-friendly environment,” said Dane Stangler, vice president of Research and Policy at the Kauffman Foundation. “Policymakers put themselves in the best position to encourage sustainable growth and long-term prosperity by listening to the voices of small business owners themselves.”

Complete results are available at the Thumbtack.com website and include full sets of rankings and dozens of easily searchable quotes from small businesses nationwide. Each state and city also has its own data visualization showing its detailed survey results.

Survey Method 

Thumbtack.com surveyed 12,632 small businesses across the United States. The survey asked questions about the friendliness of states and cities toward small business, such as:

• "In general, how would you rate your state’s support of small business owners?"

• "Would you discourage or encourage someone from starting a new business where you live?" and

• "Do you think you pay your fair share of taxes?"

Thumbtack.com and the Kauffman Foundation evaluated states and cities against one another along more than a dozen metrics. The full methodology paper can be found here.