Colorado economic freedom ranks high – Montana, Wyoming, South Dakota, North Dakota, Idaho, Washington, Oregon ratings mixed. (How does your state rank?)

Colorado’s light hand with labor laws and business regulation and its relatively small government make it one of the most economically free states in the country.

Economic freedom translates into economic growth, said Devon Herrick, a fellow with the National Center for Policy Analysis in Dallas, one of two free-market think tanks behind the North American Index of Economic Freedom * http://www.ncpa.org/pub/st/EconFreedNorthAm.pdf released Tuesday.

By Aldo Svaldi
Denver Post Business Writer

http://www.denverpost.com/Stories/0,1413,36~33~1918881,00.html

"If you tie someone’s hands and don’t let them act economically, you limit growth," Herrick said.

***************

Montana

Montana ranked 50th overall in the all-government
measurement of states and provinces and 48th on
the state and local index. Its best showing, if it can
be called that, came in takings and taxation, where it
fi nished 48th in the all-government rankings and 36th
in state and local. From there, it’s downhill: in size
of government, the state was 49th at both all-government
and subnational levels, and in labor market freedom,
48th in both the all-government and subnational
measurements—an improvement. Another (relatively)
bright spot: there is no general sales-and-use tax, and
its effective state and local tax burden is below the
national average at 9.2%.

North Dakota

North Dakota shares dismal scores with neighboring
Montana in two of the three areas of economic freedom,
for an overall ranking of 42nd in the all-government
group and 45th in state and local. It holds the 35th
ranking at a state and local level for takings and discriminatory
taxation and 36th in all-government takings.
In size of government, North Dakota is 43rd in
all-government and 49th state and local; for labor market
freedom, 36th, and 34th —the big success story. The
state’s effective state and local sales tax burden just
over the national average at 9.9%. North Dakota’s fall
is somewhat perplexing; in 1981, it was 11th in the overall
all-government index and 14th in the subnational.

South Dakota

Last year we noted, “What a difference an adjective
makes.” This year it’s even more pronounced. Sitting
due south of woeful North Dakota, South Dakota
holds 3rd place in the overall in the all-government
measurements and to 1st place in a multi-state tie in
the state and local index. Its size of government rat-
Economic Freedom of North America: 2004 Annual Report 35
ing is 17th all-government and stays at 4th state and
local, and it fi nishes 11th and 6th, respectively in takings
and taxation. South Dakota is strongest in labor
market freedom, at 6th and 5th, respectively. The state
has a comparatively low general sales-and-use tax of
4%, and at 9.1% its effective state and local sales tax
burden is only the 44th in the United States. Perhaps
they should invite the folks from North Dakota down
for a chat.

Idaho

Idaho’s overall rating for all-government is 31st, and
33rd for state and local. Size of government ratings put
it at 31st for all-government and 29th for state and local.
Its labor market freedom rankings are the same for
both categories at 25th. Idaho’s takings and taxation
rank 26th in all-government and 39th for state and local,
another modest improvement over the previous year.
At 25¢ per gallon, its gasoline tax is tied for 4th highest.
The effective state and local tax burden is 10.3%,
higher than 38 other states.

Wyoming

Wyoming ranks 17th overall in the all-government
measurement. Between 1981 and 1998, it never ranked
lower than 3rd. It was 31st in the state and local index. Its
strongest ratings are in labor market freedom: 10th in allgovernment
and 11th in state and local. In the takings
and taxation rankings, it scored 42nd, all-government,
and 44th, subnational. Wyoming’s other slip comes in
the state and local area of size of government, where it
places 36th (its all-government ranking is 16th).

Oregon

Oregon has a substantial gap between its rating in the
all-government measurement, where it ranks 26th, and
in the state and local index where it comes in 38th. But
that’s in line with the disparity of its measurements
in the size of government category, 21st in all-government
and 46th in state and local. For takings and taxation,
the state skyrockets to 5th all-government and 13th
state and local but promptly fi zzles out in labor market
freedom, dropping to 48th in both. Oregon doesn’t
impose a general sales tax, its 9.2% effective state and
local sales tax burden is below the national average,
and the beer tax is a little over 8¢.
1989). It didn’t earn the relatively high marks for its
size of government ratings, 42nd, all-government, and
29th state and local. Its rankings on takings and discriminatory

Washington

Washington’s overall rankings—42nd all-government
and 48th state and local—suggest there aren’t many
happy surprises, and both those fi gures represent a
worsening from 2000. The size of government ranking
of 17th in the all-government measurement is actually
up slightly from 2000, but the state comes in at 48th state
and local. Labor market freedom is a mess: 52nd in both
categories among the states and provinces. The state
is 46th in the all-government area and 36th in the subnational
for takings and discriminatory taxation. The
36 Economic Freedom of North America: 2004 Annual Report
general sales tax is on the high end at 6.5%, although
its effective state and local tax burden is less onerous
than some: 9.9%, making it 16th in the country.

***************

Still, the study doesn’t explain why Colorado suffered higher job losses and slower growth than other states in the past two years. Herrick said the state’s flexibility should help an economic recovery.

Colorado scored 8.2 on a 10-point scale, tying for first with Delaware, South Dakota and Tennessee. Colorado ranked third last year.

Vancouver, British Columbia-based Fraser Institute co-wrote the study, which considered government spending as a percentage of the overall state economy, government employment as a percentage of total employment, transfer payments, taxation levels, and the flexibility of labor laws.

Colorado made the top five on all measures except for its state and local tax burden, where it ranked 15th.

Colorado and the other top three finishers reported an average of $2,954 more per person in state economic output than the country as a whole from 1994 to 2001.

West Virginia, the bottom state in the ranking, lagged the nation by $4,431 in per-capita state gross domestic product.

State Senate President John Andrews, R-Centennial, attributed Colorado’s high ranking to the "good sense" of state voters in keeping government small and in passing the Taxpayer’s Bill of Rights, or TABOR, a constitutional amendment that limits tax increases and government spending.

Andrews said he is not concerned that the handful of bills floating through the statehouse this session will derail Colorado’s ranking. But he is concerned that a potential ballot initiative could overturn TABOR this fall.

Although the link between less government and more prosperity has been tested over two decades, it doesn’t equate to a direct cause and effect.

New York and Alaska are much stronger economically than might be expected from their freedom scores, while Louisiana and Indiana, in contrast, have much weaker economies than their freedom scores would otherwise indicate.