By Benita M. Dodd
Georgia ranks an impressive No. 7 out of all 50 states in the 2017 Economic Freedom of North America report, released this week by the Georgia Public Policy Foundation in conjunction with Canada’s Fraser Institute.
Georgia scored a total of 7.5 out of 10 in rankings on government spending, taxation and labor market restrictions. Based on 2015 data (the latest available), the Fraser Institute’s 13th annual report measures the degree to which the policies and institutions of states/provinces in the United States, Canada and Mexico support economic freedom.
At the top in the United States is New Hampshire, scoring 8.3 out of 10. Ahead of Georgia were Florida and Texas (tied for No. 2, scoring 8.1), South Dakota (No. 4, scoring 8), Tennessee (No. 5, scoring 7.8) and Virginia (No. 6, scoring 7.6). Oklahama tied with Georgia. Neighbor North Carolina tied with four other states at No. 18, scoring 7.2.
What can Georgia glean from its rankings compared to those states finishing ahead of the Peach State?
First, government spending is not why Georgia isn’t finishing at the top. When comparing all government spending (the United States, Canadian provinces and Mexican states), Alberta, Canada tied for first place with New Hampshire, both scoring 8. Georgia was one of 10 states tied for third place, scoring 7.9. (The other nine were Florida, Idaho, Kansas, Nevada, Oklahoma, South Carolina, South Dakota, Texas and Utah.)
Looking at all U.S. government spending (including federal spending), Georgia ranks No. 13. Looking at neighbors and competitors, Florida is No. 5, Texas is No. 6, South Carolina and Tennessee are tied at No. 28, Alabama is 43 and North Carolina is No. 49.
When comparing government spending to other states (excluding federal), Georgia finishes a respectable No. 9. Florida ranks No.3, Texas ranks No. 5, Tennessee ranks No. 12, South Carolina ranks 39, North Carolina is No. 23. Alabama is No. 31.
Labor market restrictions are not the problem, either. Georgia’s at the top of the list on all-government labor market freedom (including federal-level policies), tying for first place in the nation with states including Florida, North Carolina, South Carolina, Tennessee and Texas. Alabama was 29.
Comparing states to one another on labor market freedom, the report ranked Georgia at No. 7. Texas was No. 1. Florida and Tennessee tied at No. 5. North Carolina was No. 12, South Carolina was No. 17 and Alabama was No. 41.
So what’s left?
It’s quite simple, really. Taxation. At the all-government level of taxation in the United States (including federal policy), Alaska, which collects no income or state sales taxes, is No. 1. Georgia’s score tied for No. 24 in the nation with Indiana, Louisiana, Oregon, Texas and Washington state.
Middle of the pack is not bad. Unless the states ahead of you are your neighbors. Alabama is No. 2 on all-government taxation (including federal). South Carolina is No. 7, Florida and Tennessee tie for No. 14, North Carolina is No. 19. (Beginning in 2014, North Carolina’s scores improved as the state phased in lower tax rates).
At the state level on taxes, Georgia ties with neighbor South Carolina, at No. 20. Ahead of Georgia are neighbors Alabama (No. 8), Florida and Tennessee (tied at No. 3) and Texas (No. 6). The last three all have no personal income taxes. North Carolina is No. 26; watch it surge ahead as lower tax rates are fully implemented by 2019.
Why are all these numbers important?
“The link between economic freedom and prosperity is clear – People who live in states that support comparatively low taxation, limited government and flexible labor markets have higher living standards and greater economic opportunity,” said Dean Stansel, economics professor at Southern Methodist University and co-author of the report.
Georgia has everything going for it, except the will to lower the personal income tax rate. With so many small-business owners filing at the “personal” level, lower taxes would not only given them the opportunity to keep more of their own money, it would allow them to expand their businesses, investing in equipment and adding employees.
Even if that doesn’t improve the economic freedom ranking for Georgia, it clearly enhances the economic freedom for Georgians. Why settle for No. 7 when Georgia could finish at the top?
Benita Dodd is vice president of the Georgia Public Policy Foundation, an independent, nonprofit think tank that proposes market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the view of the Georgia Public Policy Foundation or 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 (December 15, 2017). Permission to reprint in whole or in part is hereby granted, provided the author and her affiliations are cited.