A new Fraser Institute report reaffirms just how much more economically free some states are compared with others. These are places where citizens are allowed to make more of their economic choices. Their taxes are lighter, and their regulatory burdens are easier. The benefits for workers, consumers, and businesses have been clear for a long time.
There’s another group of states to watch: “movers” that have become much freer in recent decades. These are states that may not be the freest, but they have been cutting taxes and red tape enough to make a big difference.
How do they fare?
I recently explored this question using 22 years of data from the same Economic Freedom of North America index. The index uses 10 variables encompassing government spending, taxation, and labor regulation to assess the degree of economic freedom in each of the 50 states.
Some states, such as New Hampshire, have long topped the list. It’s been in the top five for three decades. With little room to grow, the Granite State’s level of economic freedom hasn’t budged much lately. Others, such as Alaska, have significantly improved economic freedom over the last two decades. Because it started so low, it remains relatively unfree at 43rd out of 50.
Three states — North Carolina, North Dakota, and Idaho — have managed to markedly increase and rank highly on economic freedom.
In 2000, North Carolina was the 19th most economically free state in the union. Though its labor market was relatively unhindered by the state’s government, its top marginal income tax rate was America’s ninth-highest, and it spent more money than most states.
From 2013 to 2022, North Carolina reduced its top marginal income tax rate from 7.75 percent to 4.99 percent, reduced government employment, and allowed the minimum wage to fall relative to per-capita income. By 2022, it had the second-freest labor market in the country and was ninth in overall economic freedom.
North Dakota took a similar path, reducing its 5.54 percent top income tax rate to 2.9 percent, scaling back government employment, and lowering its minimum wage to better reflect local incomes. It went from the 27th most economically free state in the union in 2000 to the 10th freest by 2022.
Idaho saw the most significant improvement. The Gem State has steadily improved spending, taxing, and labor market freedom, allowing it to rise from the 28th most economically free state in 2000 to the eighth freest in 2022.
We can contrast these three states with a group that has achieved equal and opposite distinction: California, Delaware, New Jersey, and Maryland have managed to decrease economic freedom and end up among the least free overall.
What was the result?
The economies of the three liberating states have enjoyed almost twice as much economic growth. Controlling for inflation, North Carolina, North Dakota, and Idaho grew an average of 41 percent since 2010. The four repressors grew by just 24 percent.
Among liberators, statewide personal income grew 47 percent from 2010 to 2022. Among repressors, it grew just 26 percent.
In fact, when it comes to income growth per person, increases in economic freedom seem to matter even more than a state’s overall, long-term level of freedom. Meanwhile, when it comes to population growth, placing highly over longer periods of time matters more.
The liberators are not unique. There is now a large body of international evidence documenting the freedom-prosperity connection. At the state level, high and growing levels of economic freedom go hand-in-hand with higher levels of income, entrepreneurship, in-migration, and income mobility. In economically free states, incomes tend to grow faster at the top and bottom of the income ladder.
These states suffer less poverty, homelessness, and food insecurity, and may even have marginally happier, more philanthropic, and more tolerant populations.
In short, liberation works. Repression doesn’t.
Matthew D. Mitchell is a senior fellow with the Fraser Institute, and an affiliated senior scholar with the Mercatus Center at George Mason University.
Reprinted with Permission from The DC Journal – By Matthew D. Mitchell
The opinions expressed by columnists are their own and do not necessarily represent the views of AMAC or AMAC Action.
I live in California where politicians and bureaucrats think of ways to bilk it’s citizens, if it can be taxed it will, but if not there’s a fee. Politicians pretend to listen only if there’s an election, then afterwards it’s take some more. Dems only care about one thing: staying in power and as proven, will spend it’s way into bankruptcy to do so. There is no infrastructure, there is no relief for the taxpayers and businesses are packing up to leave. California politicians could care less and are never held accountable.
Am stuck in the “Demonratic” state of HellIllinois. Used to be conservative in the olden days but let too many immigrants come in that the Demonrats let vote. My mother told me that years ago. I hate it but too old to move. I live in a demonratic county and silently vote Republican every time. The voting helpers laugh every time I come in to vote, I hate Demonrats to the n’th degree. As I said, too old to move but I vote conservative every time.
In local elections the candidates all espouse Demonratic pledges but they have to run the town and do so in an “o.k.” fashion so I vote for the least “vicious” demonrat as I have no other choice. Works out o.k. generally.
In national elections, I want all demonrats out of office. I don’t care one bit if it’s one party rule. They are the worst political party on this planet and hate them to the n’th degree!!
Bottom line –
Blue States (and blue cities) are bureaucratic run nightmares of HIGHEST taxes, ENDLESS and NEEDLESS regulations, HIGHEST crime, HIGHEST numbers of homeless and druggies, FAILING schools, HIGHEST numbers of welfare-ites, the MOST EXPENSIVE STATES AND CITIES TO LIVE IN, and the HIGHEST numbers of illegals just to mention a few.
And ALL OF THIS MISERY IS COURTESY OF THE LYING, MEGA-CORRUPT DEMORATS and the MEGA-STUPID DEMORAT VOTERS FOR ELECTING THESE CROOKS OVER AND OVER AND OVER AGAIN.
California government officials can learn from this as we now have the highest cost of living in all States. I think because of the influx of illegals and the free dole-outs given to them while most poor Californians are homeless. Just look at our cities’ sidewalks full of homeless & tents from San Fran to LA, etc. That’s Democrat’s governance who doesn’t seem to care?
New York State is not that much better than Cali or Illinois. They care nothing about the American citizens and give our tax dollars and benefits to illegals. I am glad I was able to escape.
Only a Democrat would be surprised by this!
“Repression”. Dumba$$ocrat$ love it. Eat it for breakfast! Yup. They do, too…