2013 Economic Freedom of North America

Posted by robertmbeard 10 years, 5 months ago to Economics
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The Fraser Institute is a free market think tank in Alberta, Canada. Here is their assessment of economic freedom in each US state and Canadian province...
SOURCE URL: https://www.fraserinstitute.org/research-news/display.aspx?id=20692


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  • Posted by 10 years, 5 months ago
    The 2013 Fraser Institute study is similar to the one I had read from 2012. It scores 10 components in 3 broad areas, each on a scale from 0-10, with 10 being maximum economic freedom. The 3 broad areas are:
    (1) size of government
    (2) takings and discriminatory taxation
    (3) regulation

    The 10 components of the 3 broad areas above are:
    (1A) Government spending as % of GDP
    (1B) Transfers and subsidies as % of GDP
    (1C) Social security payments as % of GDP
    (2A) Total tax revenue as % of GDP
    (2B) Top marginal income tax rate and income threshold
    (2C) Indirect tax revenue as % of GDP
    (2D) Sales taxes as % of GDP
    (3A) labor market freedom
    (3B) credit market regulations
    (3C) business regulations

    While not included in the overall composite scores in the comparison summary, the study includes additional info in 3 more broad areas:
    (4) legal system and property rights
    (5) sound money (monetary policy and inflation)
    (6) freedom to trade internationally

    The study looks fairly comprehensive and well done... It is 92 pages long and provides tables of relative rankings for states/provinces for each of the economic freedom components above...
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    • Posted by khalling 10 years, 5 months ago
      I'm surprised we are ranked as high as we are. The regulatory burden estimated in dollars is ranked 10th in the world against GDP. That means we are neck to neck with Canada's GDP and our reg burden cost. criminal!
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      • Posted by 10 years, 5 months ago
        I am also a bit surprised we score as high as we do. As far as I can tell, both the 2014 world index of economic freedom and the 2013 Fraser report for the US and Canada use data that is 2-3 years old. So, we likely have deteriorated more relative to other countries in the last 2 years. The world index scores do include (4) legal system/property rights, (5) sound money, and (6) free international trade. The US scores high on free international trade (better than most countries) and still relatively high on legal system/property rights. I think that's what is helping prop up our relative ranking...
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  • Posted by 10 years, 5 months ago
    I should also point out that the 2013 report summarizes data from 2 years earlier (2011), so it doesn't include any further erosions in US economic freedom in the last 2+ years. This is their 9th annual report of North American economic freedom.

    The study also breaks down the data between the all-government level and the sub-national level. At the sub-national level, the 10 best states/provinces for economic freedom were:
    (1) Alberta, Canada
    (2) South Dakota
    (3) Tennessee
    (4) Delaware
    (5) Texas
    (6) Virginia
    (7) Louisiana
    (8) North Dakota
    (9) Georgia
    (10) Nebraska

    The 10 worst states/provinces identified were:
    (51) California
    (52) Maine
    (53) Vermont
    (54) Ontario, Canada
    (55) New York
    (56) New Brunswick, Canada
    (57) Manitoba, Canada
    (58) Prince Edward Island, Canada
    (59) Nova Scotia, Canada
    (60) Quebec, Canada

    At the all-government level, the 10 Canadian provinces score better than shown above, primarily since Canada's federal taxes and government spending are not as bad as the US's federal taxes and spending...
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  • Posted by 10 years, 5 months ago
    This is a detailed 2013 US/Canada state/province study of economic freedom, while my previous post was the national 2014 index of economic freedom (US was #12, Canada #6), comparing all countries of the world.
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  • Posted by DennisMay 10 years, 5 months ago
    The fact that Illinois is seen as the top tier of freedom means this list is bunk.
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    • Posted by 10 years, 5 months ago
      I too was initially puzzled by Illinois' rank. Keep in mind there are 2 ranking lists:
      (1) all govt level (fed, state, local)
      (2) sub-national level (state, local)

      Illinois ranks 33rd at the sub-national level (31st among US states only) and ranks 14th at the all govt level (10th among US states only). Why is there a difference, you may ask?

      The sub-national ranking (which I listed in the posts on this page) is a better state vs. state comparison. At the all govt level, certain inequities due to federal policies skew the rankings. For southern states, where federal transfer payments (welfare) take from some states and subsidize others, the component 1B score changes. This is where Illinois scores high (8.7) -- apparently the feds transfer less welfare to Illinois than to southern states... Component 2D (sales taxes) is also high for Illinois (8.2).

      Since composite scores at the all-govt level are closer together for US states, it only takes 1 or 2 scores above to skew Illinois to a more favorable score. However, for better state vs. state comparisons, the sub-national score eliminates any federal skewing, and it shows Illinois ranking poorly, as I would expect...
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  • Posted by $ jbrenner 10 years, 5 months ago
    Florida ranks below the middle. This is kind of surprising to me given the lack of a state income tax. I did agree with the reasoning behind some of Florida's negative category scores. Let's just say that Florida is highly variable. Three counties in southeast Florida are like their own country. North Florida is like the South. Central Florida, particularly east central Florida, would make a particularly nice winter home for Atlantis.
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    • Posted by 10 years, 5 months ago
      Indeed, the People's Republic of South Florida, PRSF (Palm Beach, Broward, and Miami-Dade counties) significantly skews the results.

      Florida scores 39th at the all-govt level (33rd among US states) and scores 23rd at the sub-national level (22nd among US states). Sub-national govt spending (1A) and indirect tax revenues (2C) are very poor scores (both 4.9) and largely due to PRSF activity. At the all-govt level, Florida scores poorly on Social Security spending (1C) with a score of 3.8, and on Indirect Tax revenues (2C) with a score of 3.6. On the positive side, Florida scores 10.0 for top marginal state income tax rate (no income tax) at the sub-national level...
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      • Posted by $ jbrenner 10 years, 5 months ago
        A large portion of those indirect tax revenues in Florida are from a thriving tourism industry. I have heard several people in the tourism industry on both sides of the indirect tax issue. Some see the net effect of a common advertising program as being positive, and then there are people who would be fit for Galt's Gulch who would rather not subsidize their competition.
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