Tag Archives: New Hampshire

Third Edition of Freedom in the 50 States

Today the Mercatus Center released the third edition of Freedom in the 50 States by Will Ruger and Jason Sorens. In this new edition, the authors score states on over 200 policy variables. Additionally, they have collected data from 2001 to measure how states’ freedom rankings have changed over the past decade. While several organizations publish state freedom rankingsFreedom in the 50 States is the only one that measures both economic and personal freedoms.

Ruger and Sorens have implemented a new methodology for measuring freedom. While previously the authors developed a subjective weighting system in which they sought to determine how significantly policies limited the freedom of how many people, in this edition they have use a victim-cost method, assigning a dollar value to each variable that restricts freedom measuring the cost of restricting freedom for potential victims. The authors’ cost calculations are designed to measure the value of the states’ freedom for the average resident. Since individuals measure the cost of policies differently, readers can put their own price on each freedom variable on the website to find the states that best match their subjective policy preference.

In addition to an overall freedom ranking, Freedom in the 50 States includes a breakdown of states’ Fiscal Policy Ranking, Regulatory Ranking, and Personal Freedom Ranking. On the overall freedom ranking, North Dakota comes in first followed by South Dakota, Tennessee, New Hampshire, and Oklahoma.  At the bottom of the ranking, New York ranks worst by a significant margin, with rent control and burdensome insurance regulations dragging down its regulatory freedom score. New York is behind California at 49th, then New Jersey, Hawaii, and Rhode Island.

The authors note that residents respond to the costs of freedom-reducing policies by voting with their feet. Between 2000 and 2011, New York lost 9% of its population to out-migration. In addition to all types of freedom being associated with domestic migration, the authors find that regulatory freedom in particular is associated with states’ growth in personal income. They conclude:

Freedom is not the only determinant of personal satisfaction and fulfillment, but as our analysis of migration patterns shows, it makes a tangible difference for people’s decisions about where to live. Moreover, we fully expect people in the freer states to develop and benefit from the kinds of institutions (such as symphonies and museums) and amenities (such as better restaurants and cultural attractions) seen in some of the older cities on the coasts.

[…]

These things take time, but the same kind of dynamic freedom enjoyed in Chicago or New York in the 19th century — that led to their rise — might propel places in the middle of the country to be a bit more hip to those with urbane tastes.

Rating State Business Tax Climates

Today the Tax Foundation released its annual State Business Tax Climate Index.

Good tax policy is not just about low rates. The Index’s author, Kail Padgitt, writes:

State lawmakers are always mindful of their states’ business tax climates but they are often tempted to lure business with lucrative tax incentives and subsidies instead of broad-based tax reform. This can be a dangerous proposition.

The public choice pressures that Dr. Padgitt is talking about encourage state policy makers to cut special tax deals for politically-important businesses and to keep rates high for those who are aren’t so well-connected. The Business Tax Climate report is a nice antidote to such thinking:

The goal of the index is to focus lawmakers’ attention on the importance of good tax fundamentals: enacting low tax rates and granting as few deductions, exemptions and credits as possible. This “broad base, low rate” approach is the antithesis of most efforts by state economic development departments who specialize in designing “packages” of short-term tax abatements, exemptions, and other give-aways for prospective employers who have announced that they would consider relocating. Those packages routinely include such large state and local exemptions that resident businesses must pay higher taxes to make up for the lost revenue.

The best climates: South Dakota, Alaska, Wyoming, Nevada, Florida, Montana, New Hampshire, Delaware, Utah and Indiana.

And the worst: New York, California, New Jersey, Connecticut, Ohio, Iowa, Maryland, Minnesota, Rhode Island and North Carolina.

Assorted Links

Amity Shlaes summarizes a report by Scott Moody (of the Public Choice Analytics) that compares the relatively free state of New Hampshire with less-free Maine.

FSU’s Bruce Benson makes the case for private security officers.

The Wall Street Journal takes note of a privatization trend across U.S. cities. This may be gated, so here is the punch-line:

California is looking to shed state office buildings. Milwaukee has proposed selling its water supply; in Chicago and New Haven, Conn., it’s parking meters. In Louisiana and Georgia, airports are up for grabs….About 35 deals now are in the pipeline in the U.S., according to research by Royal Bank of Scotland’s RBS Global Banking & Markets. 

 

Unforeseen Consequences of Cigarette Tax Increases

Cigarette tax increases are often politically palatable because of the product’s harmful nature, but perhaps the recent $0.62 increase in federal taxes is approaching a level that many people feel is inappropriate. Like other sin taxes, those levied on cigarettes are designed both to raise revenue and to discourage people from smoking. However, the first objective may be more and more difficult to achieve as people quit smoking because of the higher cost or find ways to avoid the tax.

A CNN reporter spoke with Denver, Colorado customers to gauge their reactions to the tax increase. Resident Larry Juke pointed out the regressive nature of such taxes, particularly relevant for a tax increase during a deep economic recession:

“They’re picking on us poor people, the ones that smoke,” Jukes, a 65-year-old who has been smoking since he was a teen, said of the government. “They have been for years.”

Since the most recent increase in federal taxes, Tobacco Haven in Brookline, New Hampshire, has come under scrutiny for a machine it owns that allows customers to make their own cigarettes with a variety of different types of tobacco. The machine is both a novelty and a way for customers to avoid some of the taxes on pre-made cigarettes without having to roll their own. An All Things Considered story explains:

Smokers in a New Hampshire tobacco shop have been lining up to use a commercial roll-your-own machine. The contraption spits out hundreds of cigarettes — for less than half the price of brand names.

But state officials want to pull the plug. They say the shop is now a cigarette manufacturer and can no longer sidestep what it owes the government.

Cigarette taxes are an especially important issue for New Hampshire because many of their sales are to customers who come in from Massachusetts or Maine to avoid the even higher taxes in their own states. A state policy blog explains:

Cigarettes are a higher-margin item and out-of-state customers typically buy other goods as well. For small stores struggling in a difficult economic environment, driving away any customers is a problem. A significant loss in a higher-margin item could make the difference between survival and closing up shop.

As tax increases urge consumers the alter their behavior more and more, customers and retailers grow more willing to resort to illegal behavior to purchase cheaper cigarettes, such as purchasing them online or from stores that do not pay the taxes. A Chicago Tribune article reports:

75 percent of cigarettes smoked in Chicago come from packs that don’t bear city tax stamps. The rate of tax avoidance here dwarfs the national average of about 20 percent, he said. In New York City — the only place in the country where cigarette taxes are higher — the avoidance rate is about 50 percent, he said, still sharply lower than Chicago’s.

Policy makers should keep in mind that as cigarette taxes continue to increase, higher revenue will not indefinitely.

Furthermore, as customers alter their behavior more and more as a result of the tax, the associated deadweight loss will increase correspondingly.

Assorted Links

Court rules Massachusetts may not collect sales taxes from Massachusetts residents who purchase tires in New Hampshire.

Maryland Governor O’Malley announces fresh budget cuts.

Sacramento to re-open park restrooms — after $8 million budget cuts and failed labor negotiations.

Oregon’s biggest stimulus project: a $133 million green makeover for the Portland federal building.

Ohio state agencies find a way around the legislature’s budget cuts to get more funding

New Hampshire Buckles Up

New Hampshire is the freest state in America, according to a Mercatus study by Jason Sorens and William P. Ruger.  This study ranked the 50 states by degree of economic and personal freedom:

New Hampshire comes out on top as the freest state in the United States. It achieved this ranking due to its excellent fiscal policies and moderate levels of regulation and paternalism. However, as with all of the states, even New Hampshire has room for improvement, and post-2006 political changes in that state may mean that its ranking in this study will fall the next time we update the data and rankings.

It seems, however, that New Hampshire is in danger of losing its number one spot.  The Wall Street Journal reports that the “Live Free or Die” state is considering passing a seat belt law:

The Granite State has long been known for its plucky Yankee self-sufficiency — it was the first colony to declare independence from Great Britain in 1776. Today it is the only state in the nation that doesn’t have a law requiring adults to wear seat belts. It has resisted efforts to pass one for 30 years, and has been the proud lone outlier since 1995, when neighboring Maine became the 49th state to buckle.

But now, legislators are close to passing a seat-belt law under a push by Democrats who gained control of the state Senate, House and governorship in 2006 for the first time in a hundred years. The Democrats have been boosted in the polls by a wave of migration from other states, including famously liberal Massachusetts, over the past decade.

A growing budget deficit in New Hampshire may be the reason why legislators are contemplating the law:

One key factor in the buckle-up bill is that the state, like others, is strapped for cash. The law would qualify New Hampshire for $3.7 million in federal money offered to states that pass or update seat-belt ordinances by July 30.

The money would come from a law passed by the Bush Administration in 2004 to incentivize the passage of seat-belt laws.  In addition to the federal money,  fines would also raise revenue for New Hampshire.  The bill calls for a $25 fine for first time offenders and $50 fines for second offences.

New study ranks Freedom in the Fifty States

William Ruger and Jason Sorens, both professors of political science, have just released their study ranking freedom in the fifty states.

Ruger and Sorens present an innovative set of criteria: they not not only rank states according to economic freedom (tax and regulation) but also what they define as personal freedom (including firearms, seatbelt, drug and marriage laws ). Colorado is virtually tied with New Hampshire and South Dakota for number one, New York is 50, with New Jersey, Rhode Island, California and Maryland sitting at the bottom.

Policy makers from states at the bottom might want to consider the reasons for their low rank more closely – New Jersey and California – both suffering unprecedented fiscal and economic crises, have not coincidentally, been losing people in recent years. Both were destination states in the 1960s – business friendly, low tax, and prosperous.

The rankings prompt important questions: Can underperforming states reverse course? And which reforms matter most?