A week after New Hampshire placed first in the Fraser Institute’s Economic Freedom in North America report, the state scored a first place finish in another prestigious freedom ranking, the Cato Institute’s 2021 Freedom in the 50 States report. 

In Cato’s report (written by Will Ruger and Jason Sorens), New Hampshire ranked third in economic freedom, second in personal freedom, and first in overall freedom. 

In economic freedom, New Hampshire ranked in the top five in state tax burden, government consumption and lawsuit freedom, but was far behind in numerous other metrics, including local tax burden (43), land use freedom (40), labor market freedom (27), health insurance freedom (19), cable and telecommunications freedom (20), and state and local assets (43).

In overall regulatory freedom, New Hampshire placed near the middle of the states at 23rd, showing that the “Live free or die” state has areas where government imposes significant economic constraints on citizens. 

In personal freedom, New Hampshire performed better than in economic freedom, ranking second in gun rights, fifth in education freedom, and fourth in asset forfeiture. The state finished in the top ten in travel freedom, mala prohibita (acts that are crimes in statute but not common law, such as firework and raw milk bans), and incarcerations and arrests for victimless crimes. 

Low rankings in personal freedom included gambling freedom (41), tobacco freedom (21), alcohol freedom (38), and campaign finance (45). 

As in the Fraser Institute’s Economic Freedom in North America, New Hampshire holds its top ranking by a narrow margin. 

The top five states for overall freedom:

1. New Hampshire
2. Florida
3. Nevada
4. Tennessee
5. South Dakota

The difference between New Hampshire’s and Florida’s scores was just four hundredths of a percentage point (0.592 vs 0.552). 

In the Fraser Institute report, New Hampshire held its top place by one one-hundredth of a point (7.83 vs. 7.82). 

The top fives states for economic freedom in Fraser’s rankings:

1. New Hampshire
2. Tennessee
3. Florida
4. Texas
5. Virginia

The Cato report shows how rapidly other states have been gaining on New Hampshire. Since Cato’s last ranking for 2018-19, New Hampshire ranked No. 8 for growth in overall freedom, but many of the states with which it now competes for population growth and business location posted similar or larger gains. 

Tennessee and North Carolina ranked 11th and 13th in overall freedom growth since the last report, while Kentucky ranked sixth, Connecticut fifth, Michigan fourth, Florida second and South Dakota first. 

The data are more concerning for New Hampshire when looking back at the last 20 years. Since 2000, the top fives states for freedom growth were:

1. Florida
2. Michigan
3. Wisconsin
4. Oklahoma
5. Georgia

New Hampshire ranked 29th, well behind states that have been aggressively cutting taxes and deregulating, such as North Carolina, West Virginia, Tennessee, Texas and Arizona. 

As a state that already ranked high on overall freedom, New Hampshire has set an example with policies that have been copied by other states. But as both reports show, there are areas where New Hampshire can make significant improvements to increase personal and economic freedom. 

Making those improvements would accomplish the primary goal of maximizing individual autonomy for Granite Staters, thus living up to New Hampshire’s promise of being the “Live free or die” state. It also would improve the conditions for economic growth, which would gradually raise New Hampshire’s standard of living. 

While these back-to-back reports give Granite Staters cause to boast about our relatively high level of economic and personal freedom, they also offer a warning that this position is threatened and will not be maintained without a continued effort to remove barriers to freedom that exist at the state and local levels. 

In the last decade, New Hampshire’s population grew at the slowest rate in a century, signaling that generations’ worth of astounding economic and cultural gains could be put at risk.

New Hampshire’s population grew by 4.5% from 2010-2020, the lowest growth rate since the state had 2.9% growth from 1910-1920. 

It marked the first time since 1920 that the state’s population growth rate has fallen below 5%.

The decline follows a 43% drop the previous decade and represents the fourth straight drop in population growth recorded by the Census. 

New Hampshire enjoyed double-digit population growth in each decade of the second half of the 20th century. But the rate began falling in the 1980s and has been in sharp decline since the 1990s.

2010-2020: 4.6%

2000-2010: 6.5%

1990-2000: 11.4%

1980-1990: 20.5%

1970-1980: 24.8%

1960-1970: 21.5%

1950-1960: 13.8%

Vermont’s population grew by just 2.8% in the last decade, down from 8.2% in the 1990s. New Hampshire is at risk of following Vermont’s path toward population stagnation. Both states already rely on immigration, rather than births, for population increase.

For decades, New Hampshire has prided itself on its pro-growth economic policies. Keeping taxes low and government small helped make our state the economic marvel of New England. Even without a large port or a cluster of elite research universities, we grew rapidly while states with better natural resources struggled. 

But New Hampshire’s focus on tax rates has left the economy vulnerable in other ares. As the state was chasing growth, local governments were trying to limit it.

Local governments have succeeded in choking off the state’s once robust population growth. That threatens the state’s economic future because the real secret to a vibrant economy is innovation, and innovation comes primarily through people sharing ideas.  

To simplify, it’s not the size of the population itself that matters as much as the size of the market. New Hampshire’s slower population growth is a problem because it is constraining the growth of the state’s economic marketplace.  

You just have to look at the help wanted signs posted everywhere to see the severity of the problem. 

“Larger markets induce more research and faster growth,” as economist Paul Romer put it.

New Hampshire has done a tremendous job stimulating increased market activity by focusing on pro-growth economic policies. But low taxes cannot be the sum of our pro-growth agenda. When creating the conditions for a vibrant marketplace, low taxes are just one factor. 

A vibrant market needs policies that allow innovation and investment, but it also needs people to do the innovating and investing. 

Local regulations that severely restrict the construction of new housing are not the only factor contributing to the state’s lower population growth, but they have played a significant role.  

Using U.S. Census data, we calculated the growth in housing units in New Hampshire in each decade going back to 1940. You can see the huge drop starting in the 1990s. 

2010-2020: 3.9%

2000-2010: 12.4%

1990-2000: 8.6%

1980-1990: 30.4%

1970-1980: 37.5%

1960-1970: 25.2%

1950-1960: 17.7%

1940-1950: 20.5%

Until the 1990s, the growth in the number of housing units was larger than the state’s population growth. In two of the last three decades, the population growth has been larger than the growth in home construction. 

That has produced a huge shortage of housing. The housing shortage is not only driving up home prices and rents. It’s constraining population growth. 

This housing shortage is reducing the supply of available workers, which is hurting the very businesses that legislators have worked so hard to help. (See all the help wanted signs.)

It’s also constraining the growth of the state’s economic market. It doesn’t do much good to help a business create a new job if, with the other hand, you make sure there’s no one around to fill the job.  

In the long run, the local regulations that have created a de facto cap on population growth will work against the tax cuts and regulatory reforms that brought us the tremendous growth of the last 70 years. 

Policymakers need to understand that creating a vibrant, innovative marketplace requires more than just keeping taxes and spending low. Artificially limiting the number of market participants shrinks the market and hurts the whole state.  

New Hampshire’s six-year run of business tax cuts should have made the state’s corporate income tax rate the second-lowest in New England. But a funny thing happened along the way. New Hampshire was joined by an unexpected rival. 

When the succession of cuts began in 2015, New Hampshire’s Business Profits Tax (BPT) rate was 8.5%, making it the third-highest corporate income tax in New England. Only Maine’s 8.93% rate and Connecticut’s 9% rate were higher. 

After the passage of the current state budget, New Hampshire’s BPT rate is down to 7.6%, a 10.5% cut in six years. (Legislators cut the Business Enterprise Tax by 27%.)

That makes New Hampshire’s rate lower than the top rate in Vermont (8.5%), Maine (8.93%) and Massachusetts (8%). 

But Connecticut, beset with fleeing businesses and a dwindling population, took measures to stop its own bleeding. It reduced its corporate income tax rate from 9% to 7.5%. 

Rhode Island’s rate has remained at 7% the entire time.

(Maine and Vermont have graduated corporate tax rates. Maine’s lowest corporate tax rate is 3.5%. Vermont’s is 6%.)

Because Connecticut lowered its corporate income tax rate by 1.5 percentage points, New Hampshire’s rate wound up moving down only one place, rather than two, among the New England states. 

This helps to illustrate an important point. States don’t act in a vacuum. 

Businesses aren’t trapped inside any jurisdiction’s borders. It’s a free country, and they can move if they find another location more hospitable. Which they sometimes do. Just ask California.

If each state could erect its own iron curtain, just imagine how high corporate and personal tax rates would be. 

But because it’s a free country, states sometimes find it in their best interest to lower rates to make themselves more attractive. 

That’s why Connecticut and New Hampshire weren’t the only places to lower corporate tax rates in the last six years. A few examples:

• New York lowered its rate from 7.1% to 6.5%. 
• Washington, D.C., dropped its rate from 9.4% to 8.25%. 
• Florida cut its rate from 5.5% to 4.4%. 
• Iowa slashed its rate from 12% to 9.8%. 
• North Carolina cut its rate in half, from 5% to 2.5%. 

Some lawmakers prefer to ignore other states and pretend that corporate tax rates are simply a lever for raising revenue from existing businesses. Raise the lever, raise the revenue. Lower the lever, lower the revenue.

But people inside and outside a state’s borders react when those levers are raised or lowered. That’s a big reason why state tax rates change. 

This year, five states states have reduced business tax rates. Ten states have reduced individual income tax rates. The total number of states to reduce either business or individual income taxes is 11, not 15, though, as some states reduced both. 

Some notable examples:

• Indiana decreased its corporate income tax rate from 5.25% to 4.9%

• Idaho reduced its corporate income tax rate from 6.925% to 6.5%, retroactive to Jan. 1.

These follow numerous changes made last year, from Arkansas eliminating its top income tax bracket to Tennessee eliminating its tax on interest and dividends to New York eliminating and Illinois reducing its capital stock tax.

It’s true that some states raise rates. New Jersey added a new top corporate tax rate, going from 9% in 2015 to 11.5%. Of course, New Jersey also has earned the title of “Most Moved From State” for three years running (and it’s particularly good at losing higher-income people). In a free country, mistakes will be made. 

And in a free country, states compete for people, entrepreneurs and businesses. 

Freedom made New Hampshire an economic marvel. Recognizing that people are free to live wherever they want, state policymakers for decades have focused on making the Granite State as attractive as possible.

It has worked beautifully. New Hampshire’s economic growth has surpassed every other New England state’s, and the national average, since the late 1970s.

With a booming economy came a growing population, which has enhanced the state’s quality of life and kept New Hampshire from becoming Vermont — a dying state that pays people to move there. 

When people are free, there’s a limit to how bossy a state can be. And there are rewards for offering people more personal, political and economic autonomy. 

New Hampshire has figured this out. Other states are catching on, just as technology has made Americans more mobile than ever before.

The competition is not over. It’s just beginning. 

More than two-thirds of New Hampshire voters support right-to-work, the Josiah Bartlett Center for Public Policy’s first public opinion poll shows. The poll also found support for Education Freedom Accounts, voter ID laws, and relaxing local housing regulations.

Asked if they would “be in favor of changing the law so that employees who don’t want to join a union could choose not to pay union fees,” 68% of New Hampshire voters said yes, and 22% said no. Ten percent said they were unsure.

“Most Granite Staters just think it’s wrong to make people pay fees to a union they don’t want to join,” Josiah Bartlett Center President Andrew Cline said.

Even Democrats broke in favor of right-to-work, the poll showed. Democrats said they would support a right-to-work law by a 44%-41% margin, just outside the poll’s margin of error. Republicans were in favor by an 88%-6% margin, and undeclared voters were in favor by a 73%-18% margin.

Every demographic group supported the passage of a right-to-work law except those who described themselves as “very liberal.” They opposed it by a margin of 29%-54%, with 17% undecided.

Twenty-seven states have right-to-work laws, which forbid employers from making non-union employees pay so-called “fair share” fees to labor unions. Employers and unions often negotiate contracts that require these fees, on the theory that non-members benefit from union collective bargaining efforts.

VOTER ID

New Hampshire voters are even more strongly in favor of requiring a photo ID to vote. Asked whether voters should “be required to show a photo ID before being allowed to cast a ballot in a New Hampshire election,” 76% said yes, and 19% said no, with 4% saying they were unsure.

By party registration, every group supported voter ID laws, with 98% of Republicans, 50% of Democrats, and 80% of undeclared voters in support. Again, only self-described “very liberal” voters were against, with 33% in favor, 61% opposed.

EDUCATION FREEDOM ACCOUNTS

A plurality of voters is favors Education Freedom Accounts, the poll shows. Asked if they would support letting families access a state-approved Education Freedom Account to pay for educational expenses outside of their assigned public school, 42% were in favor; 37% were opposed. Support was strongest among Republicans (55% in favor, 27% against), followed by undeclared voters (42% in favor, 36% against), then Democrats (28% in favor, 49% against). 

Importantly, these results closely track a poll conducted by the University of New Hampshire Survey Center in 2018. In both polls, the accounts were described in detail. That UNH poll found 40% in favor, 33% opposed, and 18% saying they didn’t know enough about the issue. 

The UNH Survey Center’s poll in March asked a very different question that did not accurately describe the accounts. Unsurprisingly, it got a different result, finding that 35% said they supported and 45% said they opposed. 

The consistency in the results for the two questions that accurately described the accounts shows that more Granite Staters support than oppose Education Freedom Accounts when they have an accurate description of the program. 

BUSINESS TAXES

Another question legislators are considering is what to do with business tax rates. We asked voters what they thought the state should do with business tax rates given the state’s large revenue surplus, which was created primarily by business taxes. The poll found that 58% of voters said business tax rates should stay the same, 34% thought rates should be cut, and only 8% thought tax rates should be raised. 

That is a very clear finding that Granite State voters do not think the state should raise business taxes. 

LOCAL HOUSING REGULATIONS

On the state’s record-setting home and rental prices, the poll found that a majority of voters (51%-29%) support relaxing some local regulations so developers can build more rental housing, and a plurality of voters (45%-34%) support relaxing some local regulations so developers can build more homes.

Democrats were the most supportive of relaxing some local regulations to build more housing. A majority of Democrats supported relaxing local regulations to build more rental housing (60%) and more single-family homes (52%). 

ABOUT THE POLL

 

Officially, New Hampshire’s minimum wage is $7.25 an hour. Finding someone who actually earns that, though, could be harder than finding a vegan in a Brazilian steakhouse on Flank Steak Friday.

“You wont’ find it,” Mike Somers, president of the New Hampshire Restaurant and Lodging Association, said. 

A person making $7.25 an hour in New Hampshire is “a bit of a unicorn,” Somers said. “Frankly, we haven’t seen it for years. I haven’t seen anybody paying less than 9.50 or 10 bucks an hour in years.”

New Hampshire is one of 19 states that ties its minimum wage to the federal minimum. Employees who earn tips or commissions can be paid less than $7.25 an hour. Tipped jobs are subject to a minimum wage of $3.27 an hour. But that’s not what people in those jobs actually earn. 

When tips are included, restaurant servers in New Hampshire average more than $18 an hour, according to the Restaurant and Lodging Association. 

So when looking for people who are paid only the minimum wage, the search has to be limited to non-tipped positions.

Before the pandemic, non-tipped minimum-wage jobs already were unusual, if not rare, in New Hampshire. The post-pandemic labor shortage might have eliminated them. 

It’s possible that some employer in New Hampshire is paying someone $7.25 an hour. But in interviews with business managers and trade associations around the state, we found no one who paid the federal minimum for non-tipped work — or who knew of any other business that paid it.

“I think it would be pretty hard to find anybody that’s paying minimum wage,” Donna Allen, manager of the Family Dollar store in Berlin, said. Her store pays $11.50 an hour to start, she said.

Kyle Daley, manager of Solomon’s store in West Stewartstown, said his store pays $9-$10 an hour to start for entry-level positions. Experienced tradespeople such as butchers make more. He didn’t know of any area employer that paid the minimum wage. 

Paul McGonagle, manager of Grant’s Shop & Save in Glen, said the store typically pays inexperienced teens $10 an hour to start. Experienced employees start at $12 an hour. 

“You’re not going to get any employees” at $7.25 an hour, he said. “You’re just not going to get them. And if the parent hears that you’re hiring their kid at $7.25 an hour, they’ll say don’t take it, go work somewhere else. Go to McDonald’s where they’re paying 11, 12 dollars an hour.”

Survey data compiled by New Hampshire Employment Security suggest that non-tipped minimum-wage jobs have been declining for years. 

The agency does not have a database of every wage paid for every job. To estimate how many people make the minimum wage, it uses data from the U.S. Census Bureau’s Current Population Survey.

Because the survey consists of a very small sample, its estimates are not considered precisely accurate. Even if the numbers are off by hundreds, though, the surveys show a years-long decline in the number of people reporting that they earn the federal minimum wage in the state. 

In 2016, Employment Security estimated based on CPS survey results that roughly 15,000 people in New Hampshire earned the minimum wage. In 2017, the number fell by nearly half, to 8,000. It fell to 1,200 in 2018 and bumped back up to 2,500 in 2019.

In 2020, the CPS survey estimated that only 235 people in New Hampshire earned the minimum wage. 

The 2020 estimate is based on a single person reporting to have earned the minimum wage. And that person reported having a tipped job, according to Employment Security. It’s possible that several times as many people earn the minimum wage in a non-tipped position — or that no one does. 

The 2020 number should be considered in the context of the pandemic-ravaged hospitality industry, where many lower-wage jobs are concentrated. Many of those jobs temporarily, or permanently, disappeared as restaurants, hotels, and tourism-related businesses closed or trimmed their workforces last year.

As the economy has recovered, the workforce has not. School closures, additional federal unemployment benefits, and a lingering fear of COVID have kept thousands out of the labor force. As a result, wages have risen unusually rapidly as employers have struggled to fill open positions.

“We put ads out months ago, and we’ve had two applications,” McGonagle said. “They’re just not coming to work because they’re being paid to sit home. And some of these people are making more sitting home than they’ve ever made before in their life.”

“Those ads run all the time. I got signs in my windows. They’re just not coming in. Why would they come in if they get more money sitting home? You go by some people’s yards, you say, wow, their yard’s getting a lot of work. My yard’s not getting any work done.”

Asked where we could find anyone still paying the minimum wage, Nancy Kyle, president of the New Hampshire Retailers Association, said, “Good luck with that.”

“Retailers are having such a hard time getting help, they have to pay in some cases double the minimum wage,” she said.

The lowest wages paid in retail, Kyle said, are typically to disabled employees who need to have someone assist them on the job. But even in those cases, it’s unlikely employers are still paying the minimum in this job market, she said.

“Oh, no,” said Lauren Blessington, manager of O’Neil Cinema in Epping, when asked if she knew of anyone who paid $7.25 an hour. 

O’Neil, a family-owned theater, pays inexperienced teenagers $8-10 an hour, the lowest starting wage we found. Experienced staff make more.

Blessington pointed out that the theater job comes with non-cash benefits that employees highly value: free movies, drinks and popcorn for the employee and a guest.

Though it’s possible that some Granite Staters are making $7.25 an hour in 2021, it’s clear that market forces have made non-tipped minimum-wage jobs extremely rare. Given recent wage growth, it’s likely that the $7.25-an-hour minimum wage job will soon be eliminated in New Hampshire, if it hasn’t been already.