That graph is from this paper by Travis Wiseman (January 2013). Abstract:
Recent studies of shadow economies focus primarily on cross-country comparisons. Few have examined regional or state-level variations in underground economic activity. This paper presents estimates of the shadow economy for the 48 contiguous U.S. states over the period 1997 to 2008. Results suggest that tax and social welfare burdens, labor market regulations, intensity of regulation enforcement, and employment conditions in the official sector are important determinants of the underground economy. Among the states, Delaware consistently maintains the smallest shadow economy (averaging 7.05% of GDP); Colorado has the second smallest shadow economy in all years but 2007 (averaging 7.30% of GDP). West Virginia and Mississippi, on average, have the largest shadow economies in the U.S. as a percent of GDP (9.61% and 9.72%, respectively).