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Louisiana Ranked 18th Among U.S. States in Economic Freedom

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Fraser Institute Report Ranks States According to Economic Freedom

The United States is often seen as the land of opportunity. But since opportunities are directly related to economic freedom, they are more attainable in some states than others.

A December report by the Fraser Institute, an independent, non-partisan Canadian think tank, Economic Freedom of North America, shows that not all state governments honor personal choice and the market – the two key components of economic freedom.

According to the report, Louisiana offers more economic freedom than many states, tying Idaho and Indiana for 18th in the nation, but still less than its neighbors. For example, Texas and Florida tied for 3rd, and Tennessee ranked 5th.

If other regional states can reduce unnecessary government restrictions, Louisiana can too. And fortunately, the report highlights specific areas where the Pelican State can, and should, rein in government.

The Report

The United States were ranked in several major categories, including government spending, taxes and regulations. Each category was scored from 0 (least freedom) to 10 (most freedom), based on scores (also 0-10) from several subcategories analyzed within each.

Let’s take a look at Louisiana’s performance in comparison to the national average.

Government Spending:

Subcategory Louisiana National Average
General consumption expenditures by government as a percent of income 5.7 6.9
Transfers and subsidies as a percent of income 8.7 7.8
Insurance and retirement payments as a percent of income 5.4 5.7

 

Louisiana’s overall government spending score fell short of the national average of 6.8, with a score of 6.6. Louisiana has a spending problem, which is the telltale sign of an overreaching government that may constrain economic freedom.

For example, on “General consumption expenditures by government as a percent of income,” the authors explained that once government extends beyond what is considered “protective” and “productive” and into the realm of that which can be handled by private businesses and individuals, consumer choice is restricted, and with that economic freedom.

Taxes:

Subcategory Louisiana National Average
Income and payroll taxes 7.6 5.9
Top marginal income tax rate and insurance threshold at which it applies 8 7.4
Property taxes and other taxes as a percent of income 9.5 7.9
Sales tax revenue as a percent of income 3.3 5.5

 

Louisiana’s overall score for this category was 7.1, which is better than the national average of 6.7. But even still, its taxes are undoubtedly problematic.

Tax burdens, as noted by the study authors, restrict private choice. Limiting private choice reduces economic freedom, and thus chases off businesses and other opportunities.

Regulations:

Subcategory Louisiana National Average
Minimum wage legislation 8.8 8.1
Government employment as a percent of state employment 5.9 6.6
Union density 8.5 7.0

 

Louisiana’s overall score for this section was 7.5. Though this score is better than the national average, 7.2, government regulations still hurt economic freedom and threaten opportunity.

Louisiana’s has more public employees than the national average. When government has more employees than necessary services, it is basically wasting money to take workers out of the labor market, as explained in the report.

Looking Ahead

Fortunately, these problems do not have to be permanent. Many of these problems go hand in hand, and thus reforming one could pave the way to reforming others.

For instance, a large, expansive government is costly and difficult to sustain. So with that, tax burdens must increase.

If Louisiana reins in its spending programs and reduces the amount of government workers – who depend on government retirement programs – money will be saved. And with that, taxes – such as the low scoring sales tax – can be simplified and lowered.

If Louisiana’s newly elected officials bring about these changes, the state’s ranking could improve. Maybe one day, the Pelican State will be regarded as a land of opportunity like its neighbor Texas.

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