John Hood: Cherish Our Free State of North Carolina
RALEIGH — North Carolina isn’t quite First in Freedom. But over the past decade and a half, we’ve taken tremendous strides in the right direction.
Those are among the findings of the latest Economic Freedom of North America index, published earlier this month by the Canada-based Fraser Institute.
The new report uses 2023 data on government expenditure, taxation, and regulation to assess economic freedom across the United States, Canada, and Mexico. Among the 50 states, North Carolina ranked 7th with an index score of 7.59, behind New Hampshire (8.34), Tennessee (8.30), South Dakota (8.18), Texas (8.15), Idaho (7.89), and Florida (7.64).
Georgia (7.56), North Dakota (7.55), and Indiana (7.51) rounded out the top 10 in economic freedom. The lowest-ranked states included Oregon (4.84), California (4.79), Hawaii (4.63), New York (4.39), and New Mexico (4.05).
To measure economic freedom at the state and local level, the Fraser model uses the following variables: 1) government spending on consumption, 1) transfers and subsidies as a share of income, 3) insurance and retirement payments as a share of income, 4) income and payroll taxes as a share of income, 5) top marginal tax rate and the minimum income to which it applies, 6) sales tax as a share of income, 7) property and all other taxes as a share of income, 8) mandatory minimum wage, 9) share of workers employed by government, and 10) labor union density adjusted for share of government employment.
As recently as 2011, North Carolina’s score on the index was 5.91, ranking us 19th in the country. Since then, conservative majorities in the General Assembly and an increasing number of county governments have doggedly reduced tax and regulatory burdens, constrained the growth of public expenditure, and avoided the regulatory mistakes committed in other states. That’s why our ranking has been improving over time.
Why care about economic freedom? Because it exhibits a consistently positive association with such measures of economic and social wellbeing as poverty reduction and growth in population, employment, and income.
I’ve written about the benefits of economic freedom many times, citing hundreds of studies published in peer-reviewed journals. The new Fraser Institute paper offered more empirical evidence for the relationship. “From 2014 to 2023,” wrote co-authors Dean Stansel, José Torra, Matthew D. Mitchell, and Ángel Carrión-Tavárez, “total income in the freest 25% of North American jurisdictions grew 24% after adjusting for inflation. In the least-free jurisdictions, however, inflation-adjusted income rose only 3%.”
During the same period within the U.S. alone, population grew 17.7 times faster among the freest quartile of states (obviously including North Carolina) than it did in bottom quartile. Total employment in the freest states also grew about twice as fast as in the least-free states.
As for social mobility — the likelihood that people born into households of lower socioeconomic status will move up the proverbial ladder of opportunity — the authors also cited powerful evidence that economic freedom is a help, not a hindrance. One recent study of more than 260 metropolitan areas in the United States found that people born in high economic-freedom areas experienced both more relative and absolute income mobility than those born in less-free areas.
None of which is to suggest that social phenomena such as chronic poverty and persistent economic disparities can ever be explained by a single set of variables, or “fixed” by a single set of policy interventions. While continuing to expand economic freedom in our state, North Carolina policymakers can and should work together to improve the quality of public services such as education and the courts, promote innovation in health care and transportation, and foster stable families and safe communities.
As I’ve also previously argued, we can all help by supporting worthy causes with our time and money, building and maintaining social connections, and being more active in the civic life of our communities and state.
Freedom is our birthright as North Carolinians. One way to safeguard it is to make productive use of it.
John Hood is a John Locke Foundation board member. His books Mountain Folk, Forest Folk, and Water Folk combine epic fantasy with American history (FolkloreCycle.com).
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