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Study finds these are the least- and most-expensive states for running a business in 2021

Posted by Neha De

December 2, 2021    |     4-minute read (656 words)

Running your own company is always challenging. Location is just one of many things you need to consider, as it can have a significant impact on your business’ long-term success. Enterprise cloud software platform Approve.com recently conducted a study and found Texas to be the country’s least expensive state for running a business. The study weighed factors such as average annual wage, top corporate income tax rate, average electricity price and average internet price. While it included Washington, D.C., the study excluded Alaska and Hawaii due to data not being available.  

Read on to learn about America’s least- and most-expensive states for running a business, according to the study. 

The cheapest states to run a business

Texas – One of the country’s biggest and most populated states is also the cheapest when it comes to business costs, especially its tax policies and utilities costs. In addition to having some of the lowest prices when it comes to employee salaries ($39,640 a year) and electricity (8.52 cents per kilowatt hour), Texas also has a fairly low average cost per Mbit when it comes to internet connections; although, it should be noted that corporate tax rates were excluded from the ranking for Texas, as the state has a franchise tax instead, which is not directly comparable.

It is no surprise then why Tesla CEO and co-founder Elon Musk moved his company headquarters from Palo Alto, California, to Austin. Tesla is one of the many companies, including Oracle, Charles Schwab and Hewlett Packard Enterprise, to have shifted base to Texas.

Oklahoma – Oklahoma, Texas’s neighboring state, comes in second in terms of business affordability, with average employee wages coming in at just over $37,000 per year and businesses spending only 7.96 cents per kWh of electricity.

Several companies in the state are in the fields of energy, aviation, biotechnology and telecommunications, with the majority being based in the major commercial centers of Tulsa and Oklahoma City.

Kentucky – Another Southern state, Kentucky takes third place, and just like Texas and Oklahoma, it has low costs when it comes to employee salaries ($37,230 per year) and fixed internet ($2.00 per Mbit). 

The most expensive states to run a business

California – Apart from being one of the most populated states in the country as well as one of the most important to the economy, California is also the most expensive when it comes to business costs.

Even though it is among the cheaper states when it comes to internet costs ($1.86), California is the most expensive state when it came to energy bills, with a cost of 17.74 cents per kWh of electricity, which is over two and a half times higher than in the cheapest state in terms of electricity, Nevada.

A recent study by the University of California at Berkeley’s Haas School of Business revealed that customers of Pacific Gas and Electric Company, California’s largest utility, pay nearly 80% more per kilowatt-hour than the national average, because of wildfire-related costs as well as fixed costs related to the state’s energy efficiency programs. 

New Jersey – New Jersey comes in second when it comes to the states with the highest business costs. This is especially due to the fact that New Jersey has the highest corporate tax rate, with those in the top bracket in the state paying 11.5%. That is the highest possible rate in the country and was planned to be lowered; however, a decision was taken to restore the 11.5% rate until 2023.

Vermont – Vermont is one of America’s smallest and least populated states, and is still among the most expensive to run a business in. The state is especially expensive when it comes to the cost of electricity (16.67 cents per kWh) and the corporate tax rate, which is currently 8.5% for those in the top earnings bracket.

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