New Hampshire again rated most economically free state, but the gap is closing
New Hampshire has once again retained its status as the most economically-free state in North America in this year’s Economic Freedom in North America report published by the Fraser Institute, an independent, non-partisan Canadian public policy think tank.
In both the continental and in-country rankings, New Hampshire finished first. Within the United States, Tennessee leapt past Florida to pull within a fraction of a point of the Granite State, showing how vulnerable New Hampshire’s position has become.
New Hampshire scored 7.83 out of 10 in this year’s report (down from 7.84 last year), beating out second-place Tennessee (7.82).
Economic freedom — the ability of individuals to make their own economic decisions about what to buy, where to work and whether to start a business — is fundamental to prosperity.
“When governments allow markets to decide what’s produced, how it’s produced and how much is produced, citizens enjoy greater levels of economic freedom,” said Fred McMahon, the Dr. Michael A. Walker Research Chair in Economic Freedom at the Fraser Institute and co-author of this year’s Economic Freedom of North America report, which measures government spending, taxation and labor market restrictions using data from 2019, the latest year of available comparable data.
“New Hampshire ranks as the freest state in the union again this year, but just barely,” Josiah Bartlett Center for Public Policy President Andrew Cline said. “As other states aggressively liberalize their economies, New Hampshire risks falling behind.”
Tennessee, ranked the 5th most economically free U.S. state in last year’s report, shot to within one one-hundredth of a point of tying New Hampshire for first place this year, Cline pointed out. The rankings are based on 2019 data. Tennessee’s interest and dividends tax was eliminated on Jan. 1 of this year, which will give it an advantage over New Hampshire in upcoming rankings, as our I&D tax lingers for five years until fully phased out.
Though New Hampshire leads all of its New England neighbors in economic freedom, Southern states are catching up by cutting taxes, spending and regulations. Rounding out the top five freest states are Florida (3rd), Texas (4th) and Virginia (5th).
At the other end of the index, New York (50th) is once again the least-free state followed by California (49th), Vermont (48th), West Virginia (47th) and New Mexico (46th). New York ranked last in the report for the seventh year in a row.
The other New England states are ranked as follows: Massachusetts (19th), Connecticut (21st), Rhode Island (41st), Maine (43rd), and Vermont (48th).
Across North America, the least-free quartile of jurisdictions had an average per- capita income 1.0 percent below the national average compared to 7.5 percent above the national average for the most-free quartile.
“Hundreds of independent studies have produced overwhelming evidence that higher levels of economic freedom are associated with more opportunity, more prosperity, greater economic growth, more investment and more jobs,” said Dean Stansel, report co-author and economist at Southern Methodist University.
The report measures the ability of individuals to act in the economic sphere free of undue restrictions by ranking states on 10 variables in three areas: 1. Government Spending; 2. Taxes; and 3. Labor Market Regulation.
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 more than a quarter century of work by more than 60 scholars, including three Nobel laureates.
Detailed tables for each country and subnational jurisdiction can be found at www.fraserinstitute.org.
Or you can read the full report here: EFNA-2021-US-POST
