Editorial Staff

Report: Economic Freedom Up Slightly Across U.S.

/in , , , /by Editorial Staff
Share on Facebook
Share on Twitter
Share on
LinkedIn
+

Massachusetts ranks 13th in North American index

BOSTON – Massachusetts ranks 13th out of all 50 states in this year’s Economic Freedom of North America report, released today by the Pioneer Institute in conjunction with Canada’s Fraser Institute.

“Massachusetts has real competitive advantages over other states – a top-rate education system, talent across financial services, consulting and important research and innovation sectors,” said Jim Stergios, executive director of Pioneer Institute. “But state government has also advanced policies that make Massachusetts an expensive place to live and work. We have a well-earned reputation for over-regulation and huge debt obligations that are a drag on the economy.  Several issues on the ballot in 2018, including additional tax increases and restrictions on labor freedoms, would only erode Massachusetts’ standing further.”

Download: Economic Freedom of North America report

For the third year in a row, New Hampshire has the highest level of economic freedom among all U.S. states. It scored 8.3 out of 10 in this year’s report, which measures government spending, taxation and labor market restrictions using data from 2015, the most recent year of available comparable data.

“The freest economies operate with comparatively less government interference, relying more on personal choice and markets to decide what’s produced, how it’s produced and how much is produced. As government imposes restrictions on these choices, there’s less economic freedom and less opportunity for prosperity,” said Fred McMahon, the Dr. Michael A. Walker Research Chair in Economic Freedom at the Fraser Institute and report co-author.

After New Hampshire, the freest states are Florida and Texas (tied for 2nd), South Dakota (4th) and Tennessee (5th). For the third year in a row, New York was ranked least free (50th), followed by California (49th), New Mexico and West Virginia (tied for 47th), and Hawaii and Mississippi (tied for 45th).

The report includes an additional all-government ranking, which adds federal government policy to the index and includes the 50 U.S. states, 32 Mexican states, and 10 Canadian provinces.

Since 2004, the average score for U.S. states in the all-government index has fallen from 8.20 to 7.78 out of 10 in 2015, driven largely by changes at the federal level.

In the most-free states, the average per capita income in 2015 was seven percent above the national average compared to roughly five percent below the national average in the least-free states.

“The link between economic freedom and prosperity is clear—people who live in states that support comparatively low taxation, limited government, and flexible labor markets have higher living standards and greater economic opportunity,” said Dean Stansel, economics professor at Southern Methodist University and co-author of the report.

The Economic Freedom of North America report, also co-authored by José Torra, the head of research at the Mexico City-based Caminos de la Libertad, is an offshoot of the Fraser Institute’s Economic Freedom of the World index, the result of over a quarter-century of work by more than 60 scholars, including three Nobel laureates.

See the full report at fraserinstitute.org and fraserinstitute.org/economic-freedom.

About the Economic Freedom Index

Economic Freedom of North America (EFNA) measures the degree to which the policies and institutions of states/provinces support economic freedom. This year’s publication ranks 92 provincial/state governments in Canada, the United States and Mexico. The report also updates data in earlier reports in instances where data has been revised.

For more information on the EFNA Network, datasets and previous Economic Freedom of North America reports, visit www.fraserinstitute.org/economic-freedom. And you can ‘Like’ the Economic Freedom Network on Facebook at facebook.com/EconomicFreedomNetwork.

###

Pioneer Institute is an independent, non-partisan, privately funded research organization that seeks to improve the quality of life in Massachusetts through civic discourse and intellectually rigorous, data-driven public policy solutions based on free market principles, individual liberty and responsibility, and the ideal of effective, limited and accountable government.

Related Research

Study: “Millionaire’s Tax” Would Have Far-Reaching Effects on “Pass-Through” Businesses

A proposed graduated income tax that will appear on the statewide ballot in November 2022 will have much more far-reaching implications than most people realize because the surtax also extends to “pass-through” income from entities such as S and limited liability corporations, partnerships, and sole proprietorships that are taxed on individual tax returns, according to a new study published by Pioneer Institute.
Welcome to New Hampshire Sign: Live Free or Die

Study Warns that New Hampshire Tax Policies Would Exacerbate Impacts of a Graduated Income Tax

Drawing on migration patterns between Massachusetts and states like Rhode Island and Tennessee, Pioneer Institute is releasing a study showing a direct correlation between personal income tax rates and household domestic migration patterns between 2004 and 2019. The study suggests that instituting a graduated income tax will shrink the tax base and deter talented workers and innovative employers from coming to and staying in the Bay State.

Study Finds SALT Deduction Cap, Graduated Income Tax Will Combine to More Than Double Tax Burden on Some Households

A provision of the federal Tax Cuts and Jobs Act of 2017 strictly limiting deductions for state and local taxes (SALT) will greatly exacerbate the adverse effects of a proposal to create a constitutionally mandated graduated income tax, according to a new study published by Pioneer Institute.

Study Suggests How to Advance Fairness, Predictability of “Payment in Lieu of Taxes” Programs Aimed at Nonprofits

A new white paper by Pioneer Institute calls for increased transparency over the basis for payment in lieu of taxes (“PILOT”) agreements between municipal governments and nonprofit organizations, while also encouraging nonprofits to publicize and expand the community benefits they provide.

Public Statement on Implementation of the Charitable Giving Deduction

Despite being awash in cash, the state Legislature just overrode Gov. Charlie Baker’s veto of a provision to delay by yet another year a tax deduction for charitable donations. Rep. Mark Cusack, House chair of the Joint Committee on Revenue, said “it doesn’t mean no, just not now.” If not now, when?

Study Says Massachusetts Surtax Proposal Could Reduce Taxable Income in the State by Over $2 Billion

As voters now begin to weigh the potential impact of a ballot proposal to increase taxes on business owners, retirees and wealthier households, a new literature review by Pioneer Institute shows that many existing academic studies find that wealthy individuals are particularly sensitive to changes in tax policy. Other studies explicitly warn policymakers that behavioral responses to taxing the rich could erode the tax base and ultimately strain state budgets.

This Is No Time for a Tax Increase

This is no time to threaten Massachusetts’ prospects for an immediate economic recovery and the long-term competitiveness of the Commonwealth’s businesses. As Massachusetts lawmakers prepare to vote on whether to send a proposed constitutional amendment that would impose a 4 percent surtax on residents who earn $1 million or more in a year to the statewide ballot in 2022, Pioneer Institute urges them to recognize that tax policy sizably impacts business and job location decisions and that jobs are more mobile than ever.
Are Massachusetts taxes regressive? Massachusetts State with Money Background

Study Finds Deep Flaws in Advocates’ Claims that the Massachusetts Tax Code is Regressive

Proponents of a state constitutional amendment to add a 4 percent surtax on all households with annual income above $1 million frequently cite 2015 data from the Institute on Taxation and Economic Policy, which argues that the Massachusetts tax code is regressive, but a new study published by Pioneer Institute debunks many of the underlying assumptions used in ITEP’s 2015 report.

Study Says Interstate Tax Competition, Relocation Subsidies Exacerbate Telecommuting Trends

A spate of new incentive and subsidy programs seeking to lure talented workers and innovative businesses away from their home states could constitute an additional challenge to Massachusetts’ economic and fiscal recovery from COVID-19, according to a new study published by Pioneer Institute.