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10 Worst Tax States for Small Business 2011
Here are the 10 states with the worst tax systems for small business owners this year, according to The Small Business & Entrepreneurship Council's Business Tax Index 2011.

State Business Tax Climate

The Small Business & Entrepreneurship Council recently released its "Business Tax Index 2011: Best to Worst State Tax Systems for Entrepreneurship and Small Business," which ranks the 50 states and the District of Columbia based on their tax systems. The index pulls together 18 different tax measures and combines them into one tax score that allows them to be compared with one another. Among the taxes included are income, capital gains, property, death/inheritance, unemployment, and various consumption-based taxes, including state gas and diesel levies.

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Rhode Island

No. 10: Rhode Island

The tiny state rounds out the top 10 worst states for entrepreneurs in 2011. Rhode Island's unemployment insurance tax is among the worst in the nation.

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Hawaii Sunset, Kona, slideshow

No. 9: Hawaii

The index helps to reveal the burden small business owners face regarding taxes nationwide. Hawaii's corporate income tax rate is 5.4% of income up to $100,000 and 6.4% of income more than $100,000.

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Skiing Vermont

No. 8: Vermont

Some states have increased taxes to help close widening budget gaps, leaving taxpayers to foot the bill, according to the SBE Council. Vermont's state and local tax burden sits at 10.2%, higher than the nation's average.

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University of California - Berkeley, PF Slideshow

No. 7: California

The index pulls together 18 different tax measures into one tax score to compare the tax climate of all 50 states and the District of Columbia. The Golden State allowed temporary tax surcharges to expire, which was a positive for business, but not enough to raise its ranking.

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Lobster Fishing in Maine

No. 6: Maine

The Pine Tree State came in as the sixth worst in tax climate for small business owners in 2011 because its state and local tax burden is above the national average.

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Corn Plants Growing at an Iowa Farm

No. 5: Iowa

Among the taxes included are income, capital gains and property. Iowa's corporate income tax rate is 12%, among the highest in the country.

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Traders at the New York Mercantile Exchange

No. 4: New York

Also included in the index rankings are death and inheritance taxes as well as unemployment taxes. New York has the highest property taxes in the country.

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New Jersey

No. 3: New Jersey

Consumption-based taxes, like state gas and diesel levies, are also part of the tax-ranking system. The Garden State allowed temporary tax surcharges to expire, which was a positive for business, but not enough to raise its ranking.

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9. Minnesota

No. 2: Minnesota

The worse a state's tax system is for business owners, the less competitive it becomes, the SBE Council said. The state and local tax burden in Minnesota is above the national average of 9.8%.

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Washington DC Street

No. 1: Washington, D.C.

The nation's capital came in as the worst tax system for entrepreneurs and small businesses; its sky-high food and drink tax of 10% help earn its ranking.

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10 Worst Tax States for Small Business 2011

Here are the 10 states with the worst tax systems for small business owners this year, according to The Small Business & Entrepreneurship Council's Business Tax Index 2011.

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