And the top state for business is ... South Dakota

Economy

Scott Cohn CNBC

7 hours ago

AP

From the mountaintops, we declare that South Dakota is the best state for doing business. The worst? Hawaii, but where would you rather be, honestly?

Set it in stone! South Dakota, the home of Mount Rushmore, where the greatest presidents are carved into rock, is this year's top state for doing business in America, according to CNBC.

It finished ahead of Texas, last year's winner, and neighboring North Dakota, which came third in the annual poll. Nebraska finished fourth and there was a tie for fifth between Utah and Virginia.

South Dakota's point total this year?1,639 out of a possible 2,500?is the highest logged by any state since CNBC began keeping score in 2007.

(Read more:More Than Mount Rushmore by SD Gov. Daugaard)

Each year, NBC's business channel rates all 50 states on more than 50 metrics in 10 categories of competitiveness. It weighs the categories based on how frequently they appear as selling points in state economic development marketing materials. That way, states are held to their own standards.

You can read more about our methodology here.

This year's categories and point values are:

• Cost of Doing Business (450 points)
• Economy (375 points)
• Infrastructure (350 points)
• Workforce (300 points)
• Quality of Life (300 points)
• Technology & Innovation (300 points)
• Business Friendliness (200 points)
• Education (150 points)
• Cost of Living (50 points)
• Access to Capital (25 points)

(Read More:States Battle for Business With Fatter War Chests)

South Dakota not only offers one of the lowest tax burdens in the country?no individual or corporate income taxes and low sales and property taxes?but it also has among the nation's lowest utility rates, wages and commercial rent costs.

With a pristine environment, relatively low crime, and some of America's most stunning natural beauty, South Dakota finishes seventh in Quality of Life.

And the state's economy, while often overshadowed by its oil-booming neighbor to the north, finishes a solid sixth. State finances are strong, the housing market is recovering, and the unemployment rate is among the nation's lowest.

(Read More:States for Creating Manufacturing Jobs)

That low unemployment hurts South Dakota in the Workforce category, where it finishes 11th?in part due to the short supply of available workers. It is a problem Gov. Dennis Daugaard is not taking lying down.

In May, Daugaard traveled to neighboring Minnesota to open a kiosk in the Mall of America to attract workers to his state.

"I like to think of South Dakota is not stealing employees, but providing refuge," Daugaard said.

(Read more:Beyond Mount Rushmore ? from SD Gov. Daugaard)

Runners-up

Rounding out this year's Top Five are some old favorites and a new entry.

Texas, which has never finished below second place in our study, keeps the streak alive in 2013. Texas makes a big deal about low costs, and with no individual or corporate income tax, the Lone Star State does offer one of the most favorable tax burdens in the country, despite higher-than-average sales and property taxes. But Cost of Doing Business measures more than just taxes. For example, Texas has some of the highest electricity costs in the country, and office and retail rent is on the high side as well.

Texas also suffers in our Quality of Life category, falling to 41st (tied with South Carolina) from 35th in the category last year. The state's air and water quality rank poorly, and Texas leads the nation in residents without health insurance. However, Gov. Rick Perry has defended that statistic as emblematic of the state's freedom of choice.

"Texas decided a long time ago that we weren't going to burden people and force them to buy insurance," Perry told CNBC in 2012.

North Dakota, a historic economic success story, improves on last year's fifth place finish to come in third this year. But North Dakota is, in some ways, held back by its own prosperity. With the nation's lowest unemployment rate, workers are in short supply. That raises wage costs. And North Dakota's growing pains leave the state with some of the most expensive rental costs in the country for industrial space.

(Read more:Will Everyone Move to North Dakota)

Nebraska cracks our Top Five for the first time, shining in Business Friendliness, where it finishes third, as well as Economy and Quality of Life, where it comes in fourth. Tax reform has been a major priority in the state, which comes in 10th for Cost of Doing Business.

We have never had a tie in our Top Five, until now. Utah and Virginia, last year's Nos. 2 and 3 states respectively, tie for fifth place this year.

Utah's strongest category is Business Friendliness, where it finishes fourth. The Beehive State is attracting lots of investment, finishing seventh for Access to Capital.

(Read more:Where the Jobs Are)

Biggest Pop and Biggest Drop

Massachusetts, which climbs to 16th place from 28th a year ago, improves in most categories this year, most notably Economy, where the state jumps to third place from 21st. The state is experiencing solid economic growth, state finances are improving, and so is the housing market. Massachusetts does drop to seventh for Education, however, a category where it is typically at or near the top.

Delaware moves up to 31st from 43rd. Yes, Delaware is the corporate address for more than half the nation's publicly traded companies, and accommodative business regulations are the reason. But the First State has been embroiled in controversy over its unclaimed property laws, which some have called a "stealth tax" on business. The state has raked in millions year after year by assessing businesses penalties and fees for property they hold but no longer own.

Illinois posts the biggest decline in our rankings this year, falling 11 spots to 37th, from 26th in 2012. With a heavy tax burden including among the highest gasoline taxes in the country, as well as high utility costs and relatively high wages, Illinois ties for 44th place (with Pennsylvania and Washington) for Cost of Doing Business. With the worst bond rating in the country, high unemployment and a lackluster housing market, Illinois finishes 45th in the crucial Economy category. But the Land of Lincoln does manage top five finishes in Infrastructure and Technology & Innovation.

(Read more: Land of Lincoln Grows ? from Illinois Gov. Quinn)

Bringing up the Rear

Nevada, which finishes 46th, falling from 45th last year, is still mired in the housing crisis, with the highest foreclosure rate in the nation. With the highest unemployment as well, it is no wonder Nevada finishes at the bottom of our Economy category. It also finishes at the bottom for Education, and near the bottom for Quality of Life and Access to Capital.

(Read more: Nevada Is the Place To Do Business ? Nevada Gov. Sandoval)

California, barrels into the Bottom Five this year, moving to 47th place from 40th last year. The Golden State has an apt nickname when it comes to Cost of Doing Business?California's business costs are the most expensive in the country. In fact, the state finishes near the bottom in every metric of business costs that we track. But California is a land of extremes. No state comes close for Access to Capital, where California finishes first. And it finishes second, behind New York, for Technology & Innovation.

State 48 is West Virginia, unchanged from 2012. The Mountain State notches its worst numbers in the Workforce category, where it finishes last. Workers there are the nation's least educated, population growth is stagnant, and the state's heavy union presence?West Virginia is a non-right-to-work state?hurts it in the category. West Virginia also comes in last for Business Friendliness. Even in its strongest category, Cost of Doing Business, West Virginia can manage no better than 19th.

Rhode Island, the Ocean State, climbs ever so slightly out of the depths this year to 49th place. The state came in 50th last year. A perennial loser in our study, Rhode Island finishes near the bottom this year for Economy, Infrastructure and Business Friendliness. In fact, the state is in the bottom 10 in every category except for Cost of Doing Business where it comes in 32nd, Quality of Life at 20th and Access to Capital at 23rd.

America's Bottom State for Business turns in a dismal performance across the board?almost.

It has the worst Infrastructure, the highest Cost of Living, minimal Access to Capital and among the highest Cost of Doing Business.

After we ranked the state near the bottom in 2012, an economic development official was quoted as saying, "We always rank at the bottom. It's not something new."

But the Bottom State does have one thing going for it: the nation's Top Quality of Life. And with that, America's Bottom State for Business 2013?Hawaii?gets the last laugh.

(Read more: Hawaii Hits Bottom as Worst State for Business)

We want to know what you think. Check out our complete rankings to see how your state stacks up. Leave us your comments on Twitter or Facebook using the tag #TopStates.

?By CNBC's Scott Cohn. Follow him on Twitter @ScottCohnCNBC.

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