Despite Improvements, Mass. Ranks Among Worst States for Cost of Doing Business

This week, CNBC released its annual “Top States for Business” rankings, which placed Massachusetts at No. 20 overall, an improvement over 2024 (No. 38). However, hold the champagne celebration: The state once again ranked among the country’s worst states for the cost of doing business at No. 49.

The CNBC study, “America’s Top States for Business 2025,” scored all 50 states based on 135 metrics across 10 broad categories of competitiveness, including infrastructure, workforce, education, and more. Each category is weighted and combined to assign a cumulative ranking to each state.

CNBC’s cost of doing business analysis considers the competitiveness of each state’s tax climate, wage and utility costs, as well as the cost of office and industrial space. MOA’s original and ongoing research sheds more light on these key areas, and where the state has gone right – and wrong – in addressing its poor ranking.  

The High Cost of Setting Up Shop in Massachusetts 

Massachusetts is the second-most-expensive state to do business in, behind only Hawaii. The state leads the nation in wage expenses and ranks third nationally for utility costs. Our commercial and industrial real estate costs are also among the steepest in the country, adding another layer of expense for businesses looking to establish or expand operations in Massachusetts.

Boston’s office market exemplifies these cost challenges. Even with a vacancy rate above 17 percent, the city maintains some of the tightest office conditions in the country and was the sole Northeast market to see annual rent increases, with rates climbing to $47 per square foot according to CommercialEdge data cited by Boston Real Estate Times. 

The state’s business competitiveness issues extend beyond just costs. Massachusetts ranks No. 42 for Business Friendliness, hampered by an extensive regulatory framework. CNBC assigned Massachusetts a “D+” grade in Business Friendliness, highlighting the challenging regulatory landscape businesses must navigate in the state.

Steep Tax Burden for Residents & Businesses

Massachusetts corporate tax rate remains one of the highest in the nation. Making matters worse, the state also has one of the highest unemployment insurance (UI) tax rates in the nation, which falls on employers. According to a May 2025 Pioneer Institute study, Massachusetts is only one of only four states to have lost private sector employment since 2020, while the rest of the country saw the private sector grow.  

Some progress has been made on this front. In 2023, the Governor signed a $1 billion tax relief package into law, and the recently-approved state budget does not include any new tax hikes. However, more can be done to reduce the burden for Massachusetts residents and businesses. 

Massachusetts residents face a heavy tax burden compared to other states. It’s no wonder over 8 in 10 respondents in an MOA poll (82 percent) said taxes are too high. On top of that, most respondents (55 percent) don’t believe the state government is doing enough to create a welcoming environment for small businesses and job creators.

Rising Cost of Living

In MOA’s April poll, 32 percent of voters identified reducing housing costs as the single most important issue they want the gubernatorial candidates to address in their campaigns—more than any other issue. 

Massachusetts has some of the least affordable housing in the country, taking the No. 50 spot on Realtor.com’s ranking of all 50 states and Washington, D.C. WallHub ranks Massachusetts at No. 6 in the nation for steepest housing costs. 

According to the Massachusetts Taxpayer’s Foundation, the Commonwealth ranks No. 47 in the country for its cost of living, No. 47 for average childcare costs, and No. 48 energy costs.

When it comes to lowering energy prices, a majority of voters (56 percent) support expanding nuclear energy in Massachusetts as a way to increase reliability and reduce costs. Governor Healey has also advanced this idea. Her proposed Energy Affordability, Independence & Innovation Act would open the door to greater deployment of newer, more reliable nuclear energy facilities as part of a push to save ratepayers $10 billion over a decade. This would help not just individuals and families, but businesses of all sizes. 

Outmigration Crisis

Massachusetts has one of the worst outmigration rates in the country, exacerbated by the recent implementation of the wealth surtax on income over $1 million—a tax burden driving residents and workforce talent to other states. 

When asked to identify the top issues forcing people to leave the state, the three most common responses in MOA’s monthly polling are rising housing prices (79 percent), cost of living concerns (77 percent), and high taxes (66 percent).

What Business Leaders Are Saying

Christopher R. Anderson, president of the Massachusetts High Technology Council, which co-organized MOA along with the Massachusetts Competitive Partnership and Pioneer Institute, issued the following statement in response to CNBC’s 2025 analysis:

“It’s encouraging to see Massachusetts make overall gains, but our bleak business climate is a clear signal that we must act decisively and together to course-correct. High taxes, rising costs, and growing fiscal pressures are eroding our ability to retain talent, attract investment, and support thriving communities. We invite elected state leaders to join the growing number of business leaders and residents across Massachusetts who are committed to enacting forward-looking solutions that will restore our competitive edge and secure a stronger, more prosperous future for all.”

Jay Ash, president and CEO of the Massachusetts Competitive Partnership, added:

“With the adoption and now implementation of the Mass Leads Act and the Affordable Homes Act, the Administration and Legislature are taking steps to address major needs in our overall economy. While we can celebrate that, we can’t lose sight of the continuing poor performance 

Massachusetts has on the ‘cost of doing business’ ranking, where we have been mired at No. 49 for several years. We need to realize that we’re competing with other states that are far more affordable to host a business, hire employees, and experience lessor or no tax burdens. We need to address costs to keep businesses and people here, while attracting more of each.” 

Conclusion

MOA will continue to work with private sector leaders across the Commonwealth, as well as policymakers and legislators, to educate and promote ideas that will lead to a more prosperous Massachusetts for all. It’s clear action needs to be taken to make the state economy more competitive by addressing the factors leading to the poor ranking.