Red States Benefit from Economic Freedom, Says Study

NCPA/Fraser Study Also Shows Citizens Profit In More Economically Free States

DALLAS, Texas (June 29, 2005) – States that voted for George W. Bush in the last election tend to have less government regulation and more economic freedom than states that voted for Sen. John Kerry, according to a report released today by the National Center for Policy Analysis (NCPA) and Canada’s Fraser Institute. Ten of the 12 states with the most economic freedom were carried by President Bush (Red states), and 7 of the 12 least economically free states were carried by Sen. Kerry (Blue states).

“People in Red states prefer more economic freedom,” said NCPA Senior Fellow Devon Herrick. “The pay-off is that they enjoy higher economic growth.”

The report ranks states based on the degree of economic freedom. The three principal factors are: size of the state’s tax burden, size of state government in relation to the state’s economy, and flexibility of the state’s labor market.

Delaware remained at the top of the index for the third straight year and West Virginia ranked last, also for the third straight year. The index ranks states on a scale of 1 to 10 (highest) and each one-point increase tends to produce about $4,500 more in per capita income (gross domestic product). While economic freedom is not the sole determinant of a state’s wealth, the correlation is strong.

  • Compared to the average (median) state, Delaware enjoys $6,772 more income (GDP) because of its higher level of economic freedom.
  • By contrast, West Virginia has $8,126 less income because of its lower level of economic freedom.
  • The 10 highest ranking red states enjoyed $3,837 in extra per capita income, while the 10 lowest ranking blue states lose $3,205 per person relative to the average state.

This year’s rankings represent a marked improvement for North Dakota, which jumped to 27 th from 34 th, and Maryland, which improved to 16 th from 21 st. But Oklahoma fell 7 places to 36 th and Illinois fell from 15 th to 21 st.

While economic freedom in Canada stayed the same on average in the 2005 report, rankings for most of the provinces improved relative to the U.S. In the 2004 report, only 4 of the 10 Canadian provinces ranked higher than West Virginia; in the 2005 report, only 4 ranked lower.

Editor’s note: Please see attached chart.

Economic Freedom Index 2005
RankStateEconomic Freedom Score**Gain (Loss) in Per Capita GDP*2004 ElectionPer Capita GDPRank in 2004
1Delaware8.4$6,772 Blue58,5031
2Tennessee8.1$5,418 Red32,8372
3Florida8.0$4,966 Red31,1833
4Arizona7.9$4,515 Red31,5715
4New Hampshire7.9$4,515 Blue36,4473
4Virginia7.9$4,515 Red39,4626
7Texas7.8$4,063 Red35,5836
8South Dakota7.7$3,612 Red32,8808
9Colorado7.6$3,160 Red39,8608
10Georgia7.5$2,709 Red35,79510
10Nevada7.5$2,709 Red37,45510
10North Carolina7.5$2,709 Red36,14512
13Indiana7.4$2,257 Red39,46212
14Nebraska7.3$1,806 Red35,28815
14Utah7.3$1,806 Red31,47115
16Alabama7.2$1,354 Red28,03515
16Maryland7.2$1,354 Blue37,03821
16Massachusetts7.2$1,354 Blue44,86115
16Missouri7.2$1,354 Red33,07915
16South Carolina7.2$1,354 Red29,81514
21Illinois7.1$903 Blue38,62415
21Kansas7.1$903 Red33,00721
23Iowa7.0$451 Red33,46025
23Pennsylvania7.0$451 Blue34,79225
25Connecticut6.9$0 Blue47,92224
25Louisiana6.9$0 Red29,39621
27New Jersey6.8($451)Blue44,33328
27North Dakota6.8($451)Red31,20334
43New Mexico6.1($3,612)Red28,89543
47New York5.9($4,515)Blue41,39547
49Rhode Island5.8($4,966)Blue34,62247
50West Virginia5.1($8,126)Red25,21950
* Gain (Loss) in Per Capita GDP reflects the estimated amount of economic activity per person that a state gains (or loses)
compared to the average state based on its level of economic freedom.
** A higher score means a higher degree of economic freedom