N.H. ranks first in USA in economic freedom, Fraser Institute study finds

New Hampshire is the most economically free state in the union, according to a report by the Fraser Institute, an independent, non-partisan Canadian public policy think tank.

New Hampshire scored a 7.93 out of 10 in this year’s report, well above its New England neighbors and far above lowest-ranked New York (4.49), which placed last for the fifth year in a row.

No other New England state made the top ten. Connecticut ranked 13th, Massachusetts 17th, Maine 36th, Rhode Island 38th, and Vermont 47th.

“New Hampshire’s low-tax, limited-government political culture continues to make the Granite State the envy of both New England and the nation,” said Andrew Cline, president of the Josiah Bartlett Center for Public Policy, which partnered with the Fraser Institute in releasing the study. “New York and Vermont, on the other hand, continue to show us that economic freedom retreats when under attack from high taxes and heavy regulations.”

The Economic Freedom of North America report measures government spending, taxation and labor market restrictions using data from 2017, the most recent year of available comparable data.

“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, report co-author and the Dr. Michael A. Walker Research Chair in Economic Freedom at the Fraser Institute.

Rounding out the top five freest states are Florida (2nd), Tennessee (3rd), Virginia (4th) and Texas (5th). Rounding out the bottom five are West Virginia (49th), Alaska (48th), Vermont (47th) and Oregon (46th).

The report also 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.

From 2003 to 2017, the average score for U.S. states in the all-government index fell from 8.23 to 7.92. Across North America, in the most-free jurisdictions, the average per capita income in 2017 was 9.2 percent above the national average compared to 3.4 percent below the national average in the least-free jurisdictions.

“Higher levels of economic freedom lead to more prosperity, greater economic growth, more investment, and more jobs and opportunities,” said Dean Stansel, report co-author and economics professor at Southern Methodist University.

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/economic-freedom.

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Study: California paid leave law reduced new mothers’ income & employment, reinforced traditional gender roles

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A big argument for mandatory paid family leave is that it would help close the gender pay gap and level the playing field with men. Women who had access to paid leave would stay in their jobs and not derail their careers to care for newborns, the theory goes. Turns out, the opposite has happened in California, according to a comprehensive new study.

A study published this week by the National Bureau of Economic Research examined the landmark 2004 paid leave law’s employment effects on first-time mothers. The “results run contrary to claims that California’s 2004 Paid Leave Act improved women’s short- or long-term career outcomes,” the authors concluded.

The researchers found that “paid leave is associated with a statistically significant short-run decrease in employment of 2.1 percentage points and a long-run decrease of 4.1 percentage points.

“Moreover, we find little evidence that California’s 2004 Paid Family Leave Act increased women’s wage earnings,” the authors wrote.

The study found that “first-time moms who used the policy saw their employment fall by 7% and annual wages fall by 8% over the next decade,” a University of Michigan summary of the report noted. “Cumulatively, new moms taking up paid leave had fewer children and had earned about $25,681 less by 2014.”

“We were surprised that this modest policy seems to be nudging mothers out of the labor force,” University of Michigan economist and lead author Martha Bailey said.

The study, which examined tax returns, found that some women replaced a portion of their lost income with alternative sources, “suggesting that paid leave encourages women to transition to more flexible working arrangements.”

That’s important because proponents of paid leave insist that government must mandate this particular benefit instead of others that polls show employees would rather have, one of the most popular being flexible working arrangements.

As we pointed out in February, 88 percent of employees in a Harvard survey said they’d accept lower pay in exchange for more flexible work hours, but only 42 percent said the same of paid leave.

Flex time or remote working arrangements could encourage mothers to stay with an employer — something California’s paid leave program did not achieve.

“Contrary to predictions that paid leave policies increase attachment to pre-birth employers (and, thus, help women retain valuable firm-specific human capital), women who had access to paid leave were no more likely to remain with their pre-birth employer than women without paid leave access, both in the short and long run.”

California’s paid leave law did not rebalance traditional gender roles, either.

“Despite the fact that California’s PFLA also gave men paid leave for family and infant care, the study found no impact on men’s employment or annual wage earnings. California’s PFLA seems to be encouraging men and women into traditional gender roles rather than leveling the playing field at work, according to Bailey.”

New mothers who took advantage of paid leave spent more time with their children, the researchers found. That tends to happen when mothers leave the labor force.

So, in sum, the law pulled women out of the workforce, reduced their career earnings, and reinforced traditional gender roles.

One could like any or all of those outcomes, but they cannot be called “progressive” and they do not achieve paid leave proponents’ stated goals of keeping women in the workforce and shrinking the gender pay gap.

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The 2019 business rate cuts made N.H. more economically competitive

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The business tax cuts that took effect this past January made New Hampshire more economically competitive, as supporters predicted, not less, as opponents suggested.

New Hampshire rose one spot this year to post the sixth-best business tax climate in the nation, according to the Tax Foundation’s 2019 rankings.

No other New England state ranks in the top 30. Maine (33), Massachusetts (36) and Rhode Island (39) are in the 30s, while Vermont (44) and Connecticut (47) are in the bottom ten.

This is exactly what the rate cuts were intended to do.

Many states are attractive to investors and entrepreneurs because of natural or cultural amenities. Massachusetts, with an excellent deep water harbor and numerous top universities, is the perfect example. States that lack big harbors, long coastlines, natural trading centers, etc., have to rely on their own ingenuity to create a more vibrant economic environment.

New Hampshire, relatively remote and mountainous, is at a natural economic disadvantage, relatively speaking. Yet “the New Hampshire Disadvantage” is not a thing. (It’s more of a Vermont thing.)

Instead, we boast of the New Hampshire Advantage, which is the result of policies deliberately crafted to make the state more economically attractive than its remote location would suggest.

Those policies have worked, and they continue to work. With no broad-based tax and, finally, regionally competitive business tax rates, Granite Staters have made their home a more attractive place to do business than either of our also remote northern New England neighbors.

Low business tax rates along with an overall low tax burden is the combination that produces the most business-friendly tax environment, the Tax Foundation report shows. Eight of the top ten states lack at least one broad-based tax, such as an income or a sales tax.

Of the top ten, only the bottom two (Utah, 9, and Indiana 10) have all major taxes. But they differ from many other states in levying those at low rates among a broad base.

With the recent success in lowering business tax rates, lawmakers will find it challenging to further enhance the New Hampshire Advantage through the manipulation of tax rates in the near future.

This suggests that more promising gains can be achieved by working on other impediments to growth and entrepreneurship, such as housing and occupational licensing regulations, overly burdensome business regulations and energy policy.

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Tax incentive scams exposed in N.J., Maryland

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Economic development tax incentives continue to shrivel under the gaze of the green eye shades.

Recent scandals involving these corporate welfare programs in Maryland and New Jersey offer cautionary tales for lawmakers tempted to join this money-losing game.

On Thursday, an executive admitted to a New Jersey task force that his company’s application for that state’s tax incentive program contained false information. The application stated that the company, Rainforest Distribution, was considering moving to Orangeburg, N.Y.

“At that point in time we had no intention of moving to Orangeburg,” the CEO said.

The application was filled out with the help of a consultant who was familiar with the state’s tax credits. To meet the tax credit criteria, she falsely claimed that the company might move out of state. The state never verified the claim before awarding the business $2.4 million in incentives to move to Bayonne, N.J.

The New Jersey tax credit program has been plagued by scandals, more of which continue to be discovered by reporters. The Philadelphia Inquirer reported this week how weak controls and questionable deals allowed connected investors to make millions on a property sold for about $20 million less than market value. The building, coincidentally, had been built in the 1990s as part of another publicly funded effort to keep GE from moving. (GE moved.)

Meanwhile, in Maryland, a state audit (DOC19) published in September exposed a shocking lack of controls in that state’s numerous tax credit programs, which hand out tens of millions of dollars.

The Maryland Department of Commerce “failed to monitor recipients of its programs for compliance” with applicable laws and regulations, the audit concluded.

For programs that required companies to create certain numbers of jobs, for instance, the department did not check payroll records but took company statements at face value.

In one case, the department awarded $5.5 million for a project that was ineligible because it consisted of “a sale and purchase transaction between related parties.”

Rather than being a valuable economic development tool, state tax incentives create incentives and opportunities for insider dealing and abuse of taxpayer funds.

Companies have incentives to cozy up to elected officials and bureaucrats, and to fudge forms. Public officials famously have less rigorous standards for giving away other people’s money than investors have for giving away their own, which is why these programs are infamous for well-connected businesses getting the better of taxpayers.

Elected officials have incentives to produce headlines and ribbon-cutting ceremonies, not returns on investment.

These latest stories offer additional cautionary tales for legislators.

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Mises vs. Marx: the rap battle

Connecting younger audiences with the ideas that drive the capitalism vs. socialism debate is challenging. If done right, it can be fun, though. Here’s the latest effort from the American Institute for Economic Research: A rap battle between Karl Marx and Ludwig von Mises. Share it with your friends, boyee.

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Rent control rhetoric vs. reality

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Last November, Ontario’s government scrapped rent controls for new rental properties. Activists called it class warfare against low-income renters and predicted huge rises in rents.

“The class war fare (sic) launched by Doug Ford’s mean-spirited government continues. Their regressive policies including removal of rent control is going to make Toronto and Ontario less affordable and livable. That’s unacceptable. We must fight this,” tweeted a self-described “human rights activist” in Toronto.

A Toronto city councilor tweeted: “Doug Ford’s decision to remove rent control from new buildings will make Toronto even less affordable. It removes tenants’ rights & drives young people out of our city.”

Eight months later, Bloomberg reported that a spike in new apartment construction and permits had created a “record apartment surge” in Toronto. The rapid addition of new units pushed the vacancy rate up to its highest level in four years and slowed the high rate of rent increases.

“The vacancy rate rose to 1.5% in the second quarter, the highest since 2015, when research firm Urbanation began tracking the data. Rent increases eased to 7.6% from 10.3% last year, bringing the cost of an average-sized unit of 794 square feet to C$2,475 ($1,894).”

This outcome should have been as surprising as hearing a Canadian say “eh.”

Reams of research show that removing rent control laws raises rental property values, encouraging construction and leading to an increase in the supply of rental housing. That increase in supply, if not artificially restricted, puts downward pressure on rents.

A Stanford University study published in March found that rent control in San Francisco reduced the supply of rental housing by 15 percent. “Thus, while rent control prevents displacement of incumbent renters in the short run, the lost rental housing supply likely drove up market rents in the long run, ultimately undermining the goals of the law.”

“In addition, the conversion of existing rental properties to higher-end, owner-occupied condominium housing ultimately led to a housing stock increasingly directed towards higher income individuals. In this way, rent control contributed to the gentri􏰃cation of San Francisco, contrary to the stated policy goal. Rent control appears to have increased income inequality in the city by both limiting displacement of minorities and attracting higher income residents.”

New Hampshire has its own version of rent control: Local land use regulations.

Needlessly burdensome restrictions on the size, location and type of apartments reduces the number of available units. These government-imposed constraints on the supply of rental units raise rents.

That, in turn, makes it harder for high-school and college graduates to afford to stay in New Hampshire after they leave the nest. And a shortage of rental units makes it more challenging for employers to recruit new talent, which puts an artificial restraint on economic growth.

It’s been widely reported this summer that many New Hampshire employers face a severe shortage of workers. A contributing factor is that many local governments have priced younger people out of the housing market.

More apartments would mean lower rents, which would make the state (Rockingham and Hillsborough Counties in particular) more accessible and attractive to the people employers are trying to hire. The same goes for single-family homes.

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State education spending sees significant increase in compromise budget

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Through a combination of one-time expenditures and increases in baseline formulas, the new state budget produces significant increases in education funding over the next two years. It is no wonder that state officials hailed the compromise as a windfall for public schools.

The budget was built upon an education funding compromise that dramatically reduced the budget’s structural deficit by shifting more than $60 million in recurring education spending to one-time spending.

But the other part of that compromise built into the budget several increases in baseline education spending that will require additional revenues in the future.

As part of the deal, increases in fiscal capacity disparity aid and free-and-reduced-price meal aid expire at the end of the 2021 fiscal year rather than continue indefinitely. Those bumps in aid are financed with $62.5 million in one-time money from the state’s budget surplus.

But other education aid increases are built into the baseline budget.

The budget changes the formula for kindergarten aid to count all kindergarteners as full-day rather than half-day students. That change will cost about $9.5 million a year above what Keno revenues had previously covered, according to the Office of Legislative Budget Assistant.

The budget also eliminates the formula by which stabilization grants were being gradually reduced. Stabilization grants are supplemental funds school districts receive as compensation for student enrollment declines. That is, schools get state funds to “stabilize” their budgets as they lose students (and the state adequacy aid that comes with those students).

The stabilization grants had been scheduled to decline by four percent of the 2012 grant level each fiscal year. The compromise budget restores them to 100 percent, permanently.

That change in state law increases 2020-2021 education spending by $56 million and adds about $6.2 million a year to the state budget going forward, according to the Office of Legislative Budget Assistant.

Finally, the budget increases the base per-pupil adequacy grant from $3,363 to $3,708. This increase was already scheduled under previous law, so it is not a new change. But it does drive state education spending higher.

Figures from the Office of Legislative Budget Assistant show that, including one-time and recurring expenditures, the budget spends $196 million more on education from FY19 through FY21, a 19.9% increase in appropriations over the 2019 budget.

Of that, $41 million is added for FY 2019, and $155 million for fiscal years 2020-21.

The line-item increase in total budgeted state education spending from FY19 to FY21 weighs in at 9.6%.

Adequate education aid accounts for the largest portion of the added spending. It rises by $111.9 million over the FY 2019 numbers approved in the previous budget.

Those are substantial spending increases, celebrated by both the Republican governor and Democratic Legislature. Yet we can’t help but suspect that political attack ads next year will frame things somewhat differently.

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Stabilizing business tax rates at last (for two years, anyway)

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Throughout 2019’s prolonged budget debate, two competing claims dominated the dispute over business tax rates. This week’s budget deal confirms conclusively which side was correct.

For months, Democratic leaders in the Legislature claimed that their budget — the one Gov. Chris Sununu vetoed — “stabilized” business tax rates. The budget did not raise taxes, they said repeatedly, but maintained existing tax rates and only eliminated tax cuts that were scheduled to take place in the future.

Republican Gov. Chris Sununu countered by accusing legislators of raising both the 2019 business tax rates and the 2021 rates.

The budget compromise Gov. Sununu signed this week reveals the truth. Unlike the vetoed state budget, this one actually keeps business tax rates the same for 2019 and 2020. It confirms that legislative leaders were incorrect when they claimed that their previous budget did not raise taxes.

On Jan. 1, 2019, the Business Profits Tax rate dropped from 7.9 percent to 7.7 percent and the Business Enterprise Tax rate dropped from 0.675 percent to 0.6 percent.

The budget that Gov. Sununu vetoed raised those rates back to their 2018 levels of 7.9 percent and 0.75 percent. It did so immediately, not in the future. It further eliminated the reductions (to 7.5 percent and 0.5 percent) scheduled to take place in 2021.

The governor insisted that the 2019 tax rates remain intact. Legislators insisted that rates return to their 2018 levels. There seemed to be no middle ground. Until this week.

How did this budget bring the two sides to agreement?

It did so by keeping this year’s tax rates intact and using revenue targets to trigger future changes.

The compromise budget keeps this year’s rates at 7.7 percent and 0.6 percent. Legislative leaders do not call this a tax cut. That is an admission that their previous budget did, in fact, raise business tax rates in 2019, not just in the future.

Under the compromise, if total general and education fund revenue for the current state fiscal year neither rises nor falls by 6 percent or more, those tax rates remain in place through the next fiscal year.

That is, the rates remain stable if revenue remains stable. At last, the budget “stabilizes” business tax revenue.

However, if total revenue rises by 6 percent or more, business tax rates will fall to the rates they were already scheduled to hit in 2021: 7.5 percent and 0.5 percent.

If total revenue falls by 6 percent or more, business tax rates will automatically snap back to their 2018 levels of 7.9 percent and 0.675 percent. This is another admission that the vetoed budget raised, rather than stabilized, business tax rates.

In essence, each side is betting that the economy will turn in their political favor in the next year.

In this deal, Democrats seem to be taking the bigger risk. To get what they have spent the better part of this year advocating, they need the economy to tank.

They have insisted that “out-of-state corporations” are unfairly undertaxed and that the state desperately needs more revenue. To achieve both, they have advocated higher business tax rates. Yet they get those higher rates only if state revenue comes in more than $155.8 million below expectations.

(Revenues have fallen slightly so far this fiscal year, but not at a rate that would trigger the tax increase.)

Gov. Sununu, on the other hand, gets two additional years of stable, relatively low tax rates (2019 and 2020). In the third year, he gets either a continuation of those rates or an additional tax cut unless state revenues quickly crater.

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Join us and U.S. Sen. Ted Cruz for our 2019 Libertas Award Dinner

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U.S. Sen. Ted Cruz, R-Texas, will headline the Josiah Bartlett Center for Public Policy’s 2019 Libertas Award Dinner.

(You can jump to our reservations page here, or you can click the “You’re invited” link in the top, right corner of the website.)

Sen. Cruz has represented Texas in the U.S. Senate since 2013. Prior to that he was solicitor general for the State of Texas, an attorney in private practice, and a domestic policy advisor to George W. Bush.

He is a cum laude graduate of Princeton University and a magna cum laude graduate of Harvard Law School.

Our Libertas Award honoree is Patty Humphrey, charter school founder and long-time school choice advocate. Mrs. Humphrey founded the N.H. Charter School Resource Center in 1995 and the N.H. Center for School Reform in 2003. These organizations were instrumental in the creation of New Hampshire’s first charter school law and in the growth and expansion of charter schools since 1995.

The dinner will be held on Thursday, Nov. 14, at the Grappone Center in Concord, N.H.

The reception begins at 6:30 p.m., dinner at 7:30.

For reservations, click .

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50 years after start of anti-Seabrook protests, a turn toward nuclear power

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If San Francisco tech bro hipsters invented a carbon-free way to generate power 24/7, they would be hailed as saviors of the planet. Though they might yet come up with some use for a venti Matcha Green Tea Frappuccino, the energy technology in question predates them and even their retro clothes. In 1951 in Idaho, scientists for the first time used a nuclear reaction to generate electricity.  

Though 59 nuclear power plants generate about 55 percent of the non-carbon-emitting power in the United States, they are still opposed by environmental activists who came of age in the 1970s.

Some of those greens are celebrating 50 years of activism in New Hampshire this month. As they celebrate, there are signs that younger Democratic politicians and activists, fearing climate change more than nuclear meltdowns, are ignoring them and embracing the promise of carbon-free nuclear power. 

This spring, the Pilgrim nuclear plant in Plymouth, Mass., closed. It followed the retirement in 2014 of Vermont Yankee. The closings leave only two nuclear plants in New England: Seabrook Station in Portsmouth and Millstone in Connecticut. 

These closures have left New England more reliant on carbon-emitting fossil fuels. 

When Pilgrim closed, ISO New England, the region’s power grid operator, concluded that three new plants that burn natural gas or oil would more than make up for Pilgrim’s 680 megawatts. 

Vermont Yankee’s closure increased carbon emissions in New England as the 604 mw of nuclear power was replaced with natural gas, ISO New England confirmed. 

As the Springfield Republican reported at the time, “while replacing coal with a natural gas plant reduces carbon emissions, replacing a nuclear plant with natural gas-fired generation has the opposite effect.”

That’s why some politicians and activists on the left are questioning the wisdom of anti-nuke extremism.

Seabrook Station offers a cautionary tale. 

Scheduled to open in 1974, New Hampshire’s only nuclear power plant did not come online until 1990. In those 26 years, carbon-free power was replaced with carbon-emitting power. 

A planned second reactor at the site was scrapped after lengthy legal battles. The additional 1,150 mw of power that would have been generated by a second reactor were instead generated by fossil-fuel-burning plants. 

Coal-burning Merrimack Station and oil/gas-burning Newington have a joint capacity of 918 mw. Had the second reactor been finished, they might have been made redundant.  

In fact, instead of opening a nuclear plant in 1974, PSNH opened its oil-burning plant at Newington. The announcement of plans to build this plant came in 1969, shortly after activists formed the Seacoast Anti-Pollution League to fight the nuclear plant, according to Peter Evans Randall’s history of Hampton. 

To get an idea of how the anti-Seabrook movement led to unintended consequences, one need only look at NextEra Energy’s license renewal application for Seabrook. It estimated that replacing the nuclear plant with coal would create 9.5 million tons of carbon dioxide emissions per year and replacing it with natural gas would create 3.5 million tons. Those estimates were based on modern technologies, not the higher-emitting ones under which Merrimack Station and Newington operated for the 26 years before Seabrook opened. 

Environmental activists still claim the 26-year delay and the killing of the second reactor as wins for the environment. The ironically named Seacoast Anti-Pollution League, formed in 1969 to oppose Seabrook Station’s construction, is holding a 50th anniversary celebration next week. 

But this week’s CNN climate town hall showed that some Democratic politicians are not buying the anti-nuke nostalgia. 

Some presidential candidates, like Elizabeth Warren, remain steeped in the ‘70s.  

“The problem is it’s got a lot of risks associated with it, particularly the risks associated with the spent fuel rods,” she said on Wednesday. “In my administration we are not going to build any new nuclear power plants.”

Fears such as Warren’s are misguided, author Ben Rhodes documented for the Yale School of Forestry and Environmental Studies last year.  

Other candidates seem to have been swayed by more recent research such as Rhodes’. The Washington Post identified five remaining Democratic presidential candidates as open to nuclear power development. At the CNN town hall, Andrew Yang and Cory Booker embraced the promise of new nuclear technology.

“Right now nuclear is more than 50 percent of our non-carbon causing energy,” Booker said, accurately. “So people who think that we can get there without nuclear being part of the blend just aren’t looking at the facts.”

“We can actually go to the kind of innovations that make nuclear safer or safe,” he said.

That one word — “innovation” — marks the change in mindset. 

For generations, environmental activism has been guided by a fixation on government control. Protesters believed that the only path to Eden led backwards into the past, formed by state suppression of disfavored technologies. 

New nuclear technology is showing the old greens to be wrong. MIT Technology Review reported in February that nuclear power is critical for reducing global carbon emissions, a fact being recognized even by some environmental groups: 

“If the current situation continues, more nuclear power plants will likely close and be replaced primarily by natural gas, causing emissions to rise,” argued the Union of Concerned Scientists—historically nuclear skeptics—in 2018. If all those plants shut down, estimates suggest, carbon emissions would increase by 6%.

At this point, the critical debate is not whether to support existing systems, says Edwin Lyman, acting director of the UCS’s nuclear safety project. “A more practical question is whether it is realistic that new nuclear plants can be deployed over the next several decades at the pace needed.”

The recognition that the path to Eden will be cleared by innovators, not regulators, is a huge insight. It hasn’t permeated the presidential field — or even Sen. Booker’s own environmental plan — yet. But the fact that some candidates and environmental organizations are embracing it at the risk of angering Prius-driving, Pete Seeger-listening Baby Boomers is encouraging. 

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