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« Quotational Therapy: Part 117 -- Winston Churchill vs. Kofi Annan. | WILLisms.com | Merry Christmas... »

Trivia Tidbit Of The Day: Part 392 -- Economic Freedom Produces Better Economic Outcomes.

Economic Freedom Wins-

The Pacific Research Institute offers some thrilling conclusions about economic freedom. Thrilling, at least, for those who love liberty. First, an examination of the most and least economically free states in America (.pdf):


Okay, resembles the familiar red/blue dichotomy a bit. To be expected.

Now, zoom in on this, eh:

In 2005, per capita personal income grew 31% faster in the 15 most economically free states than it did in the 15 states at the bottom of the list. And employment growth was a staggering 216% higher in the most free states. It hasn't been a "jobless recovery" in states that have adopted pro-growth tax and regulatory policies.

Compared to the rest of the world, the U.S. has a uniformly pro-growth economic climate. But policies vary dramatically from state to state and the biggest single policy states have to get right to out-compete the other states for jobs and high-skilled workers is taxes. Taxpayers paid 14% less in "effective tax rates" in 2005 in the most economically free states than did the taxpayers in the least free states. Effective tax rates are based on what people actually pay after deductions, exemptions and credits. This helps explain why entrepreneurs are attracted to more free states and why personal income and jobs are growing so much faster there.

Though typically tax cuts are opposed with the argument that slashing rates will force state revenue to fall, new data from the Nelson Rockefeller Institute shatters the myth that budget deficits are caused by supply-side policies. In 2005, the 15 states with the most economic freedom saw their general fund tax revenues grow at a rate more than 6% higher than the 15 least free states, despite their lower effective tax rate. Instead of blowing a hole in state budgets, lower tax rates rewarded productivity and risk-taking and allowed the economy to grow. As the economy expanded it also generated more revenue for the state Treasury as capital and people flowed in. Census data shows an astounding 245% difference in net state-to-state migration rates in 2005 between the freest states (net inflow) and least-free states (net outflow). "Live Free or Move" is fast becoming the national motto.

Awesome. Proof, meet pudding.

Economic freedom means economic success. Freer economies grow faster and otherwise perform better, than less free economies. Economic freedom improves lives and lifts people up like no central planning committee can.

In graphic form, the economically freest states saw higher per capita income growth (.pdf):


Meanwhile, the economically freest states created more jobs (.pdf):


And even with lower effective tax rates, the economically freest states saw greater growth in tax revenue (.pdf):


And, most profoundly of all, Americans voted with their feet, moving from economically unfree states to the most economically free states (.pdf):


Pudding, proof. Proof, pudding.

In a society where packing up and moving to another state is not all that unusual, Americans are taking advantage, moving to economically free states from relatively oppressive states. People are voting with their feet.

"Live free or move" indeed.


Previous Trivia Tidbit: Entitlements Versus Pork.

Posted by Will Franklin · 22 December 2006 10:22 PM


It's Christmas Eve, it's a quarter to nine. Everyone in the house is sleeping in and I fixed myself some tea and said, "I want to spend time with Will Franklin."

Will, you do not disappoint. I really enjoyed the economic freedom analysis. My New Year's resolution is to win one caption contest in '07.

Posted by: Barbara at December 24, 2006 08:49 AM

WILLisms.com is the best! Economic freedom should be all our new year's resolutions!...

Posted by: zsa zsa at December 24, 2006 11:16 AM