That makes Utah attractive to companies in an increasingly global economy, the report's authors said, and has helped lure large U.S. companies with international operations, such as eBay, Goldman Sachs, Oracle and Procter & Gamble. Utah has doubled its international trade over the past five years, and this year the rate is up nearly 40 percent, according to the Forbes study.
In response to the ranking, Gov. Gary Herbert observed that Utah has "a very fertile environment for entrepreneurs and business."
Michael Sullivan, spokesman for the Governor's Office of Economic Development, said he has a 17-page summary of third-party evaluations of states which he thinks are an important source of information to the public and company executives.
"Lists matter to people who make decisions about coming to Utah as tourists or visitors or putting Utah on their short list" of where they may want to relocate, he said.
Sullivan's boss, Spencer Eccles, said the list speaks to "the great partnership between the Governor's Office, the Legislature, state government, industry, education and the people of the state.
"We don't get to where we're going without a clear plan, without executing that plan and a clear collaborative effort. Have we arrived? No. We still have a lot of work to do."
The Governor cites three areas where he thinks Utah has a competitive advantage taxes, its labor force and a favorable regulatory climate. Utah's 5 percent flat corporate tax rate is one of the lowest in the country.
Utah ranks third in the Mercatus Center's Freedom in the 50 States study, a new metric in the Forbes' report, which gauges the for its so-called regulatory landscape.
"Utah is less likely to reward frivolous lawsuits or hand out excessive judgments," said Jason Sorens, who co-authored the report. "Utah's health insurance regulations are generally light, resulting in less costly policies and more choice for people in the small group and individual markets."
Another plus, Forbes said, is that energy costs in Utah are 29 percent below the national average. Utah also is one of only seven states to maintain an Aaa bond rating from the three rating agencies, something the U.S. lost last year, the report said.
The state's overall ranking was based on six factors costs, labor supply, regulatory environment, economic climate, growth prospects and quality of life.
Virginia came in No. 2, thanks to what Forbes noted was a pro-business regulatory climate and a top ranking in the Pollina Corporate Real Estate's study of the states with the best financial incentive programs and state economic development efforts.
North Dakota, which moved up one spot overall to No. 3, has had the country's most robust economy over the past five years, driven mostly by energy production. It is tops for job growth (2.3 percent annually), income growth (4.3 percent), gross state product growth (6.3 percent) and employment (3.5 percent average jobless rate).
The biggest gainer in this year's ranking was Indiana, which jumped 16 spots, to No. 18. A year ago, its five-year employment outlook was the worst in the nation, but it has improved to be among the top half of states, according to Moody's Analytics.
New Mexico took the biggest tumble, down 11 spots, to No. 43, because its economic climate and growth prospects declined relative to the rest of the country from last year.
Bringing up the rear in the Best States study for a third straight year was Maine. Its 1.4 percent projected annual job growth rate through 2016 ranks fourth worst among states, while the projection of 2.5 percent growth in Maine's gross state product is fifth worst.
The rankings at a glance
Utah's regulatory climate was listed third-best nationally
Indiana was most improved overall, jumping 16 spots to No. 18
New Mexico took the biggest tumble overall, down 11 spots, to No. 43
For the full report, go to http://onforb.es/UUktEo