CNBC Ranks So. Dakota Top Business-Friendly State in U.S., Texas is Second

By Curtis Houck | July 11, 2013 | 4:05 PM EDT

Mount Rushmore (AP photo)

( - South Dakota and Texas are the two best states in which to run a business, according to a report released Tuesday by CNBC that ranks all 50 states on their business -friendly environments.

Rhode Island and Hawaii were rated as the two worst states for business.

South Dakota came in first in the cost of doing business category and second in business friendliness. South Dakota has no individual or corporate state income taxes, and only a four percent state sales tax. As of May, it also had the third lowest unemployment rate in the nation, with just four percent of its population without jobs, according to the Bureau of Labor Statistics.

However, “that low unemployment hurts South Dakota in the Workforce category, where it finishes 11th—in part due to the short supply of available workers,” the CNBC report noted.

Runner-up Texas was ranked first in the areas of total state economy and infrastructure, and second in technology and innovation. Texas’ unemployment rate in May was 6.5 percent, 18th in the nation.

The Alamo (AP photo)

All of the states were scored in 51 different areas that were narrowed down to 10 categories, including the cost of doing business, public infrastructure, and the cost of living. CNBC compiled the rankings with input from the National Association of Manufacturers and the Council on Competitiveness.

Nine of the best states to conduct business have Republican governors, including all of the top five. Only one state in the top ten, Colorado, has a Democratic governor.

The top business-friendly states are:

1. South Dakota

2. Texas

3. North Dakota

4. Nebraska

5. Utah

6. Virginia

7. Colorado

8. Georgia

9. Wyoming

10. Idaho

The ten worst states to conduct business are split, with five having Republican governors and another five governed by Democrats. But the four least business-friendly states - California, West Virginia, Rhode Island, and Hawaii – all have Democratic governors.

The ten most business unfriendly states are:

41. Mississippi

42. New Jersey

43. Louisiana

44. Alaska

45. Connecticut

46. Nevada

47. California

48. West Virginia

49. Rhode Island

50. Hawaii

Despite being ranked first for its "quality of life” and having the eighth lowest unemployment rate in the U.S. at 4.7 percent , Hawaii finished last in both infrastructure and cost of living. The Aloha State also has one of the highest individual state income taxes in the U.S. - 11 percent - and most business activity is subject to a general excise tax of four percent.