Georgia’s Economics: Right on the Money

By Laura Creasy

Lately, our state has been inundated with criticisms regarding air quality, education, water resources, and urban sprawl not to mention the possible government ‘solutions’ to such problems. Between the daily criticisms and the reality of long commutes and never-ending construction, one may wonder why so many people are relocating to Georgia by choice. Well, we have the answer.

A recent study by Clemson University comparing economic freedom in the fifty states ranks Georgia 12th, making it a haven for taxpayers and businesses. Moreover, seven southern states (Table 1) in addition to Georgia rank in the top third, demonstrating the South’s commitment to hospitality in more ways than one. The study examined state-level data representing 145 economic indicators that were assigned to five categories: fiscal, regulatory, judicial, government size and welfare.

Definitions for terms vary depending on the perspective of the individual or group providing the definition. In particular, the interpretation of “freedom” is subject to much manipulation. With this understanding, the authors define economic freedom as “the right of individuals to pursue their own interests through voluntary exchange under a rule of law.” The state promulgates freedom as long as encroachments on opportunities for individuals to engage in voluntary exchange are limited. However, the imposition of taxes, regulation, and state-financed competition inevitably lead to less freedom since higher incomes are merely derived from wealth redistribution.

Although many variables were used in this analysis, a common theme exists: a net population migration occurs in states with the greatest economic freedom. This inclination of people to seek greater opportunities is supported by the in-migration to 1st-ranked Idaho versus the out-migration from 44th-ranked California. For 12th-ranked Georgia, a 13.5 percent population increase occurred between 1990 and 1997. Moreover, its net domestic migration was 513,965 in 1997. Obviously, the Peach State has some wonderful assets that, unfortunately, are failing to compete with its liabilities in terms of the latest media coverage.

According to the study, the category offering the highest level of freedom in Georgia is the fiscal (taxation) sector. In fact, its taxation sector is ranked number one in the nation with respect to economic freedom. This ranking was due in large part to Georgia’s low property, general sales and corporate income taxes. However, the tax burden on high-income families (18th highest), the per capita state and local government sales tax revenue (13th highest), and the state and local total revenue as a percent of GSP (10th highest) are caveats to economically savvy Georgia ¾ the continued creation of wealth is dependent upon less taxation.

For the moment, the steady increase of license tags with “Georgia on my mind…” continues. Given that Georgia ranks in the top third in the nation for all sectors except regulatory, Georgia has a competitive advantage over most other states in terms of attracting and retaining economic resources.

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Laura Creasy was the research director for the Georgia Public Policy Foundation. The Georgia Public Policy Foundation is an independent, nonpartisan organization dedicated to keeping all Georgians informed about their government and to providing practical ideas on key public policy issues. The Foundation believes in and actively supports private enterprise, limited government and personal responsibility. Nothing written here is to be construed as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation (August 3, 1999). Permission is hereby given to reprint this article, with appropriate credit given.