Montana’s economic freedom demonstrated the very slightest of improvements over the past year, according to the 2019 Economic Freedom of North America report.
Historically, economic freedom has been declining in North America, according to a new report published by the Economic Research Center at The Buckeye Institute in partnership with Canada’s Fraser Institute.
However, the report indicates that several U.S. states are faring better.
The most economically free state in the U.S. is New Hampshire, followed by Florida, Tennessee, Virginia and Texas, according to the report. Montana ranks 16th, reflecting a four-year trend of improvement.
The least economically free state is New York, followed by West Virginia, Alaska, Vermont, and Oregon.
“As the size of government expands, less room is available for private choice,” the authors of the report conclude. “When the government taxes one person in order to give money to another, it separates individuals from the full benefits of their labor and reduces the real returns of such activity.
“When government owns what would otherwise be private enterprises and engages in more of what would otherwise be private investment, economic freedom is reduced,” they add. ““Policymakers should seize the chance to prioritize workers by lowering their tax burdens and level the private sector playing field with smart regulatory reforms that promote job creation and business investment.”
Over regulation is Montana’s greatest threat to freedom.
“Residents of Big Sky country enjoy ample personal freedom and good fiscal policy, but regulatory policy has seen a worrying, long-term decline in both absolute and relative terms,” said the report.
The report ranks every state and province in North America based on economic freedom, as measured by government spending, taxation, and labor market restrictions. The current rankings are based on data from 2017.
“Economically free states encourage and allow families and businesses to pursue economic prosperity,” the Ohio-based Buckeye Institute said in a statement accompanying the report. “Although governments can never ensure economic success for every citizen, policymakers can take meaningful steps to make success more likely.”
Montana’s tax burden is well below the national average. Insurance freedom is middling, as the state imposes some restrictions on rating criteria but has gone to “file and use” for most lines. It joined the Interstate Insurance Product Regulation Compact in 2013–14. There is a general ban on sales below cost, and medical facilities and moving companies both face entry barriers. On lawsuit freedom it is slightly above average (less vulnerable to abusive suits). State taxes have held steady over the last several years at about 5 percent of adjusted personal income. Local taxes spiked in FY 2009 but have settled down since to about 3.1 percent of income. Montanans have virtually no choice in local government, as counties control half of local taxes. Montana’s debt burden has fallen from 20.2 percent of income in FY 2007 to 12.2 percent now. Government employment and consumption have fallen since the Great Recession and are now slightly better than average. Overall, Montana has posted consistent gains on fiscal policy over the time period we analyze.
Land-use freedom and environmental policy have deteriorated since 2007. Building restrictions are now more onerous than average. Eminent domain reform has not gone far. The state’s renewable portfolio standards are among the toughest in the country, raising the cost of electricity. The state has a fairly high minimum wage for its median wage level. Overall, Montana is one of the least free states when it comes to the labor market. Health insurance mandates are extremely expensive. Montana has gone from one of the least regulated states for occupational licensing in 2000 to one of the more regulated today. However, licensing was trimmed in 2016, and nurses enjoy substantial practice freedom. Montana is one of the better states for gun rights, although it has fairly extensive limits on where one may carry within cities. Montana also does well on gambling, where it has an unusual, competitive model for video terminals that does not involve casinos. On criminal justice, Montana is above average. Drug arrests are more than one standard deviation below the national average, but the incarceration rate is about average, when adjusted for crime rates. The state is schizophrenic on cannabis, with a reasonably liberal medical marijuana program but also the possibility of a life sentence for a single cannabis offense not involving minors and a one-year mandatory minimum for any level of cultivation. Montana reformed its terrible asset forfeiture law in 2015 but has not touched the equitable sharing loophole. Tobacco and alcohol freedoms are subpar, with draconian smoking bans, higher-than-average cigarette taxes, and state monopoly liquor stores. Educational freedom is slightly better than average, with fairly light regulation of private schools and homeschools and, since 2015, a strictly limited tax credit scholarship law. The state was forced to legalize same-sex marriage in 2014, and its oppressive super-DOMA was therefore also overturned.
The institute argues that policymakers can improve a state’s economy by reigning in government spending, reducing “needless regulations,” and simplifying a state’s tax structure.
The Fraser Institute has measured economic freedom in every state and province in the United States, Canada, and Mexico for 15 years, “creating a comprehensive assessment of trends in economic freedom.” The Buckeye Institute and its Economic Research Center co-published the report for five years in a row.