High taxes, regulations make NY dead last in freedom

Written By kom nampuldu on Minggu, 01 Maret 2015 | 18.18

The United States might be the "land of the free," but some states are clearly freer than others. Based on a new national ranking, New Yorkers have the worst claim to the benefits of a free society.

This week, the North Carolina-based John Locke Foundation published its inaugural First in Freedom Index. Using more than 60 data points, we calculated fiscal, educational, regulatory and health-care freedom in the 50 states.

New York ranked last.

Yes, this means that the state has the dubious distinction of having less freedom than California and even New Jersey.

Between high taxes and onerous regulations, New Yorkers are squeezed more than residents of other states, on top of the high cost of living.

This endeavor was no mere academic exercise. A sizable body of empirical research suggests that fiscal freedom drives economic growth, educational freedom raises student achievement, regulatory freedom promotes entrepreneurship, and health-care freedom improves quality of life.

All states have room to improve, but none more than New York.

Overall, 25 percent of states' total ranking was based on taxes controlled and amended only through the decisions of state lawmakers. These included individual income, sales, corporate, property and unemployment insurance taxes. Another 25 percent focused on government spending, including welfare payments, food stamps, housing assistance and various grants and subsidies.

Using these and other measures of fiscal freedom, we determined that New York ranked 47th nationwide. Frankly, that should come as no surprise to taxpayers and small business owners.

New York has one of the highest tax burdens in the nation.

According to data published by the Tax Foundation, New York's top marginal tax rate (8.82 percent) and percentage of personal income devoted to property taxes (4.57 percent) are among the 10 highest in the nation. To add insult to injury, New York taxpayers pay one of the country's highest combined state and average local sales tax rates, 8.48 percent.

Photo: Getty Images

New York's best showing was 37th in educational freedom, which accounted for 20 percent of the total ranking. Eight variables considered state spending and participation in private school choice programs, such as tax credit scholarships, vouchers, and Education Savings Accounts. Two variables ranked states based on the percentage of school-aged children in home schools and legal restrictions on homeschooling. New York lost ground because of both. The state fails to provide taxpayer support for private and virtual school options and imposes excessive regulations on home school families.

Eight additional variables examine public school choice, including charter schools, open enrollment and efforts to expand the teaching pool. The good news for New Yorkers is that some public-school students have access to open enrollment. In addition, the state has a high-quality charter school law and a growing charter school sector.

To assess regulatory freedom, comprising 20 percent of the total ranking, we examined six sets of variables dealing with land use, utilities, occupational freedom, torts, insurance regulations and the labor market. New York's local rent control laws, union friendliness, and excessive telecommunication regulations contributed to the state's No. 46 ranking.

Accounting for 10 percent of the total, we selected health-care variables that measure how states enforce health-care regulations and the degree to which those regulations restrict choice and competition and raise costs for consumers, medical providers and insurers. Three factors led to the state's dismal performance, a No. 49 ranking, in health-care freedom: costly small group and individual health insurance mandates, restrictive certificate-of-need laws and burdensome state benefit mandates on private health plans.

Why does all this matter? After we determined the rankings, we noticed some trends:

  • The 10 states with the highest freedom ranking had a 2.3 percent annual average growth rate in inflation-adjusted gross domestic product since 2011. But the 10 lowest states achieved only 1.5 percent.
  • National Assessment for Education Progress scores for low-income fourth-graders in the top 10 states were two points higher in reading and one point higher in math than the bottom 10 states.
  • The 10 freest states have health costs that are 18 percent lower than the bottom 10 states.

High-cost, high-regulation states clearly restrict growth and innovation.

All states have room to improve, but none more than New York. Nevertheless, improvement does not necessitate a change in political party control. Perennial "blue" states, such as Delaware,

Vermont and Rhode Island, fared very well in our ranking. Improvement requires the will to put the needs of taxpayers first by lowering taxes, limiting government spending and giving people more educational and health-care choices.

Otherwise, California and New Jersey will never have to worry about occupying the bottom spot.

Dr. Terry L. Stoops is the Director of Research and Education Studies at the John Locke Foundation.


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