February 20, 2017
RALEIGH — National rankings of the 50 states highlight North Carolina’s move in recent years toward greater freedom. A new John Locke Foundation Spotlight report compiles more than a half dozen freedom rankings linked to taxes, regulation, education, and health care.
“These rankings from North America’s best free-market and limited-government think tanks showcase an encouraging trend toward freedom in this state,” said Dr. Roy Cordato, JLF Vice President for Research and Resident Scholar. “It’s a trend that we at the John Locke Foundation wish to see continue. Much has been accomplished. There is much more work to do.”
North Carolina has climbed since 2010 in two different state-by-state rankings of “overall” freedom. The Fraser Institute’s Economic Freedom of North America ranked the Tar Heel State No. 23 in the country based on 2010 data. The latest index, using 2014 data, placed North Carolina in a five-way tie for No. 13.
Meanwhile, North Carolina’s ranking jumped from No. 26 in 2010 to No. 19 overall in the latest version of the Cato Institute’s Freedom in the 50 States. “The Fraser Institute index considers government spending, taxes, and labor market freedom,” said Julie Tisdale, JLF Policy Analyst. “The Cato Institute takes a slightly different approach by looking at freedom more generally.”
Tax rankings have highlighted dramatic improvement for North Carolina in recent years, Cordato said. “After years of being ranked in the bottom half of states in key fiscal policy indexes published by the Tax Foundation, North Carolina has skyrocketed to among the best states in the nation for both individual and business taxpayers.”
Through 2014, North Carolina consistently ranked among the most heavily taxed states in calculations of the state-by-state Tax Freedom Day. That day is based on how many days of full-time work state residents must perform to pay their total tax bills.
“Between 2012 and 2014, North Carolina hovered around No. 30 in the nation in Tax Freedom Day rankings,” Cordato said. “In the latest ranking, North Carolina comes in at No. 19.”
The implications are clear to Cordato. “Since enacting sweeping tax reforms in 2013, North Carolina has gone from being among the 20 worst states in the country to one of the 20 best states,” he said. “Since federal taxes impact all states, across-the-board tax cuts implemented at the state level in 2014 offer the only meaningful explanation for North Carolina’s improvement.”
North Carolina has seen even more dramatic improvement in the Tax Foundation’s Business Tax Climate Index. The state has jumped from a No. 41 ranking in 2014 to No. 11 this year.
“This index assesses the structure and rates of every major tax levied in the state,” Cordato said. “While it bills itself as assessing the business tax environment, it is actually a ranking of state tax policy more generally.”
Looking at regulatory freedom, North Carolina moved up from No. 28 in 2010 to No. 26 in 2014 in the Cato Institute index. “North Carolina’s leaders have made impressive strides in regulatory reform since 2011, and the Cato rankings don’t yet reflect many of those reforms,” said Jon Sanders, JLF Director of Regulatory Studies.
North Carolina could see additional improvement if leaders address “some big obstacles.” One is the state’s strict occupational licensing system, Sanders said. “Over one-fifth of North Carolina’s work force is licensed by the state, and 57 licensing boards oversee a wide range of jobs.”
North Carolina also lags behind other states in protecting private property owners against eminent domain abuse, Sanders said. “North Carolina has the only state constitution that doesn’t directly address eminent domain, and this is one of the few states that enacted no protections against eminent domain abuse in the wake of the U.S. Supreme Court’s controversial 2005 Kelo case.”
The report highlights two education-related rankings. North Carolina has jumped from No. 30 in 2011 to No. 23 in 2015 in the quality of its charter school law, according to the Center for Education Reform.
“Much of that increase was due to slight improvements in operational autonomy,” said Dr. Terry Stoops, JLF Director of Research and Education Studies. “Any further improvement will require significant revisions to the existing law. Specific changes could include expanding the types of entities — such as higher education institutions — that can authorize charter schools, and establishing a revenue stream to pay for charter schools’ buildings and facilities.”
The Tar Heel State saw a much larger jump, from No. 22 in 2012 to No. 6 in 2016, in Cato’s educational freedom ranking. Stoops credits school choice programs for opportunity scholarships and disabilities grants. “While enrollment and funding growth in both programs has been impressive, there is room for improvement,” he said. “Eligibility changes and funding increases can help address the unmet demand for private school scholarships. Establishing new Education Savings Accounts could help.”
Health care is the one area that features just one ranking with no year-to-year comparisons. The Mercatus Center’s 2016 Healthcare Openness and Access Project ranked North Carolina No. 43 among the states.
“This ranking will serve as a baseline for future editions of this report,” said Katherine Restrepo, JLF Director of Health Care Policy. “The goal is a free health care system in which health care suppliers and medical providers respond to patient demands and preferences for an array of products and services.”
One way North Carolina could boost its ranking is to clarify that insurance regulations do not apply to direct primary care, Restrepo said.
The compilation of state-by-state rankings should help focus attention on N.C. government policies that impact freedom, Cordato said. “These findings should help lawmakers and citizens who are concerned about increasing threats to personal liberty.”
The John Locke Foundation Spotlight report, “A Ranking of Freedom in North Carolina,” is available at the JLF website. For more information, please contact Dr. Roy Cordato at (919) 828-3876 or [email protected] To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected]