New York State has one of the nation’s least hospitable business climates for small businesses and entrepreneurs, a new comparison of all 50 states and the District of Columbia has concluded.

New York ranked 45th among the 50 states and the District of Columbia on the ninth annual Small Business Survival Index 2004, a ranking of the policy environment for entrepreneurship across the nation. The new report was released Oct. 7 by Raymond J. Keating, chief economist of the Small Business and Entrepreneurship Council, a Washington, D.C.-based advocacy organization.

New York fared worse than all of its neighbors, including Pennsylvania (ranked 12), Maryland (21), Connecticut (34), Ohio (40), Massachusetts (41), Vermont (41), and New Jersey (44).

“The best policy environment for entrepreneurship and small businesses consists of low taxes, limited government, restrained regulation, and government protecting life, limb, and property,” the report said. “States following such a governing philosophy will reap economic rewards from America’s entrepreneurs.”

The Small Business Survival Index is based on comparisions of 23 major government-imposed or government-related costs that affect small businesses and entrepreneurs, including a range of state and local taxes, major costs of job creation (costs of health care, electricity, workers’ compensation, e.g.), spending on government employment, and regulatory flexibility.

With higher numbers on the index denoting heavier burdens on employers, the index ranked New York:

• 40th in top personal income tax rate.
• 43rd in top capital gains tax rate.
• 39th in corporate income tax rate.
• 42nd in state and local property taxes.
• 49th in health-care costs.
• 50th in electricity costs.
• 44th in workers’ compensation premiums.
• 43rd in spending on government employment.
• 50th in gasoline taxes.

New York earned a strongly favorable ranking in only one category: crime, in which the state ranked seventh.

The report also documented the connection between the hospitality of states’ business climates and their population growth.

• From 1995-2002, the 26 lowest-ranked states had population-growth rates averaging only 6.5 percent, compared to a growth rate of 14.6 percent for the top 25 states.
  
• A similar pattern holds for internal migration, the movement of people between states. From 2000- 2002, the top 25 states netted a 777,365 increase in population at the expense of the bottom 25 states plus the District. And 1995-2000, the top 25 states gained 1,838,884 people at the expense of the bottom 26.