States also have to compete for business and taxpayers, so they need to keep their tax burdens lower and more proportional than the federal government. Even states such as Massachusetts that have raised taxes on high earners have often tried to offset these hikes with cuts elsewhere. States such as Vermont and Washington that have passed legislation authorizing single‐payer healthcare have declined to implement it in the face of the daunting tax hikes that would be required.
According to the Cato study, the most significant gainers of economic freedom since the turn of the century include Florida, Wisconsin, South Dakota, Idaho, and Georgia.
Florida’s gains have been the largest in the country, concentrated in the last 13 years. When Rick Scott took over as governor in 2011, Florida’s economic freedom level was about where it stood in 2001, and the state was fifth in the country on that score. Florida’s economic freedom immediately began to grow rapidly, and by 2017, it was ranked No. 1.
Over that time, Florida’s state and local tax burdens both fell, the government sector shrank from 10.2% of the economy to just 6.7%, government employment went down, and state and local debt was cut by more than half. Florida reformed its homeowners’ insurance market and rid taxpayers of the huge liabilities incurred by the government insurer of last resort: Citizens Property Insurance Corporation. It has also expanded opportunities for workers by reducing occupational licensing barriers.
Additionally, in the early 2000s, Florida struggled with big‐spending ballot initiatives that amended the state constitution, tying legislators’ hands and creating budget headaches. In 2006, voters agreed to tie their own hands by amending the constitution to require a higher threshold for future ballot‐initiated amendments — the same type of reform that failed this year in Ohio.
New Hampshire is another state leading the way in economic freedom, especially relative to its neighbors. It has cut the size of both its government sector and debt burden, allowing it to slash taxes repeatedly since 2015. Its growth rate has shot ahead of its closely connected neighbor, Massachusetts. Even New Hampshire’s famously high local‐property tax burden has come down. This year, Gov. Chris Sununu (R‑NH) signed a bill enacting universal licensing reciprocity, and the state has started freeing up landowners to develop homes and solve New England’s housing crisis.
How to attain growth and prosperity is not a mystery. Experiments in big government and small government have been run side by side for decades, and the results (backed by qualitative impressions as well as mountains of data) are clearer than they’ve ever been.
