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40. Olympia, Wash.
Population: 46,605
Metro hub: Olympia, Wash.
Pros: Northwestern scenery, supportive tax structure
Con: High cost of living

The top employers in Washington's capital city are all public: the state, the city government, and Providence St. Peter's Hospital. But Michael Cade, the executive director of the city's economic development council, says the talent pool of state workers breeds small-business activity: "They're government employees by day, and entrepreneurs by night."

Local businesses benefit from the city's strategic location between Seattle and Portland, the absence of a personal or corporate income tax, and Thurston County's tax exemptions on manufacturing equipment.

Cade says that plastics and machinery manufacturing are dominant industries, but the city is attracting more high technology, offering tax breaks such as credits of up to $2 million for research and development. Tourism is also on the rise: In addition to an incoming branch of the big hunting outfitter, Cabela, Olympia has waterfront retail and restaurants, and abundant parks and wildlife sanctuaries. The beautiful surroundings encourage environmentalist leanings and healthy living. -Mina Kimes

Interactive map: Olympia, Wash.
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NEXT: 41. Asheville, N.C.

Last updated July 02 2008: 11:16 AM ET
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