Monday, September 25, 2006

Maryland's Economic Freedom Ranking

Today the National Center for Policy Analysis and Canada's Fraser Institute, two well-respected non-partisan public policy research organizations, released their annual report that attempts to quantify each state's economic freedom and examines what this means for economic growth. As the news release accompanying the report aptly states: "States that have lower taxes, smaller government and flexible labor markets tend to have comparatively more economic growth." The full study may be found here.

The rankings are based on data only for the period from 2000-2003, so they should not necessarily be taken as an accurate reflection of the current reality. Nevertheless, the study provides useful information and benchmarks. Among the states, Maryland's economic freedom score ranks it in 36th place, an improvement from 39th in 2000. The study's summary for Maryland states:

[O]verall numbers both show modest improvement from three years ago, the all-government ranking moving from 39th in 2000 to 36th in 2003 and the subnational from 24th to 15th. The same three-year improvement holds for government size (42nd to 32nd all-government, 27th to 20th subnational). Changes in the other two major areas were less dramatic. All-government takings and taxation actually dropped two places to 39th while the state and local stayed at 23rd. Labor market freedom all-government also went down slightly from 31st to 33rd, while the subnational ranking, the state’s best-performing measurement over the last decade, went from 14th to 12th. Maryland once hovered around the national average for combined state and local tax burden but has now exceeded it at 10.2%, placing Maryland at 11th highest. The state is even higher—No. 4—on the overall tax list after the federal burden is folded in. Its various alcohol taxes are at or below average, especially beer at 9¢. [Page 57].

Despite Maryland's modest improvement, there is obviously a lot of room for further progress, especially regarding taxes, regulation, and labor flexibility. Legislative actions, for example, such as singling out Wal-Mart for the imposition of government-dictated levels of health care spending and local ordinances purporting to dictate a "living wage" are the antithesis of the freedom we should expect in a market-oriented economy. And these measures have the unfortunate effect, as shown in the NCPA-Fraser Institute report, of repressing economic growth.

New Hampshirites take special pride in their state's motto: "Live Free or Die." Marylanders should take special pride in their state's nickname: "The Free State." And they should do all they can to help Maryland live up to its name!