The decentralized system in the United States has an underestimated advantage: if a state, Democrat or Republican, is doing things wrong, American citizens and residents have the opportunity to migrate internally to a safer place, where there are better or more job opportunities, where the educational system is more in line with what parents want, or in short, a freer place where things are being done right.
This is what is happening with New York and Florida, or California and Texas, where workers, companies and millionaires are packing their bags to leave the historic blue Democratic states for the current red Republican ones.
In addition to economy and security, there are a handful of other reasons that can explain the phenomenon of internal migration. There is a basic economic and social premise in recent decades: the higher the freedom index, the higher the quality of life; that is why investors take much into account the famous Heritage Foundation index, where an annual freedom ranking is made taking into account a series of parameters such as legal security, regulations, tax burdens, among others.
In 2018, the Cato Institute launched a study where it detailed, item by item, which are the states with the most and least freedom throughout the union. To date, some of these still hold their prestigious places and others, on the other hand, remain at the bottom.
From Florida to Nevada, the 5 freest states in the U.S.
According to the Cato study, Florida is the freest state in the entire United States. ” Lacking an individual income tax and featuring a hot climate, Florida has long enjoyed substantial migration of well-off retirees. But as we’ve noted in the past, the state attracts more than seniors, as others vote with their feet for good weather and the increased opportunity afforded by Florida’s freer society,” the institute’s analysis says.
“Florida does especially well on economic freedom, especially on fiscal policy. Indeed, it is our top state on both. Regulatory policy is improved but mediocre in comparison to the fiscal side. Florida’s personal freedom has lagged in the past; however, it has improved a lot over the past two years.”
In second place, New Hampshire, a much smaller state than Florida, but one that offers many benefits for its residents, bursts into the picture; although this did not improve enough to remain in first place among the freest states.
“Despite big improvements in recent years, New Hampshire—the second freest state—has been overtaken by Florida. In the more distant past, New Hampshire had a huge lead over the rest of the country on fiscal policy, a lead that dissipated between 2000 and 2008 because of big increases in local property taxes, which were in turn driven by growth in education spending,” the Cato analysis says.
According to the institute, “New Hampshire’s state government taxes less than any other state but Alaska” and “is therefore a highly fiscally decentralized state.” However, it has much room for improvement.
In terms of regulations, the Granite State is one of the four worst states in the entire union when it comes to “residential building restrictions.” One of Cato’s recommendations for improvement in terms of freedoms is, justly, “review local zoning ordinances, and strike down those that increase the price of new housing beyond that needed to pay for the cost of new infrastructure.”
In third, fourth and fifth place are Indiana, Colorado and Nevada respectively. Cato notes that Indiana has quietly built a record as one of America’s freest states and the “freest state by a wide margin in the Great Lakes region.”
“Hoosiers enjoy top scores on all three dimensions of freedom, with regulatory policy a particular area of excellence,” the analysis states.
Colorado is Cato’s number-one state on freedom from “cronyism”, although it is below average on “regulatory policy as a whole.”
“It earns its top ranking in our cronyism index because of its relatively open occupational licensing system, including broad scope of practice for health care professionals and lack of a certificate-of-need law for hospitals,” the analysis says.
Finally, Nevada enjoys broad personal freedom, but the Great Recession hit its economy hard and “greatly damaged Nevada’s fiscal position” according to the institute’s analysis.
The least free states
Freedom is valued in different ways in the Cato ranking. It ranges from personal freedom, to fiscal freedom, to some individual rights that are considered important in the ranking, such as the free bearing of arms, to state regulations.
The least free states in the union are, in short, those with the most inflexible tax regimes, the most regulations on building homes, opening businesses or owning companies, and the fewest guarantees or restrictions on individual rights.
According to Cato, the least free state in the United States is New York, usually administered by Democrats both in its capital city and in almost all of its districts.
“Economic freedom is the most significant weakness,” says Cato, ” but the state has not kept up with the rest of the country on personal freedom either,” it remarks.
“New York is also the worst state on regulatory policy, although here it is at least within striking distance of number 49. Land-use freedom is very low, primarily because of the economically devastating rent control law in New York City. Local zoning is actually fairly moderate compared with surrounding states not named “Pennsylvania,'” the institute’s analysis specifies.
No less important than regulations or tax status are the individual rights of each citizen. For example, “gun rights are hedged about with all kinds of restrictions, but it is possible with some effort to get a concealed-carry license in some parts of the state.”
Below New York is Hawaii. Despite its “even with its huge locational rents, Hawaii has experienced a net outflow of residents to the rest of the United States since at least the beginning of last decade,” the study explains. “Hawaii’s fiscal policy is decidedly tax and spend. State-level taxes rose from an already high estimated 8.3 percent of personal income in FY 2009 to 9.8 percent in FY 2017.”
Then California, one of the most progressive states next to New York in the entire country, bursts in. Its main problem comes with the economic framework and that it is one of the most “cronyist” states in the country. In addition, in terms of personal freedom, it is one of the “most mediocre” in the union.
“Some cities have rent control, new housing supply is tightly restricted in the coastal areas despite high demand, and eminent domain reform has been nugatory. The state even mandates speech protections in privately owned shopping malls. Labor law is anti-employment, with no right-to-work law, high minimum wages, strict workers’ compensation mandates, mandated short-term disability insurance, stricter-than-federal anti-discrimination law, and prohibitions on consensual noncompete agreements.”
Finally, the other two states that round out the “not-top five” of free states are Vermont and New Jersey; both with similar problems in terms of their fiscal, regulatory policies and personal freedoms. However, the former, for example, improves on the other least free states in terms of gun rights; being the second freest in the entire union.
New Jersey, meanwhile, was long a tax haven that was home to the wealthy who left New York, “but over the last decade it has dwelt in the bottom five for economic freedom.”
Is the study a good parameter?
Some may wonder: isn’t 2018 a long way off to analyze which states are currently the freest? Certainly, in 3 years many things can happen; such as a pandemic or an economic crisis that force states to intervene more or less in their jurisdictions. However, sites such as World Population Review use the Cato ranking to explain, in 2021, which are the freest states in the union.
This ranking allows, in short, to know how the authorities of each state act when solving problems. For example, the pandemic showed the great differences between New York and Florida, without going that far. Therefore, the Cato ranking continues to be a solid parameter for evaluating and comparing freedoms between states.