New Jersey and New York Ranked as Worst States for "Individual Freedoms" Index ranks states by taxes and regulations. How does yours measure up?

June 8, 2011  -- Live free or die? New Hampshire may be on to something, according to researchers at George Mason University's Mercatus Center.

They used a variety of statistics to rank the 50 states for their just-published report on which states are the freest -- and least free -- from taxes and government regulation.

Their horserace has ranked New York as the "least free state in the Union" followed by neighboring New Jersey. New Hampshire and South Dakota were in a virtual tie for most "free" state.

The professors who authored the study believe that this freedom as they define it makes a lot of difference to the happiness and well-being of the governed.

Many people "don't want to have their lives dictated by people in their state capital," says William Ruger, political science professor at Texas State University-San Marcos, who co-authored the report with Jason Sorens, political science professor at the University at Buffalo, State University of New York.

"As academics, we were first interested in the scientific question of how states differ, why, and with what implications," said Ruger. "It was natural to then compare them in terms of their respect for individual freedom given how important this is to both of us."

Ruger, who is in the reserve component of the Navy, served in Afghanistan from 2008 to 2009. He said his project was not related to his time in Afghanistan, though "those who love freedom ought to take it upon themselves to defend and uphold our individual rights."

"Sometimes we do so with the pen, sometimes with the sword," he said.

New York was ranked dead last in part because it has the highest taxes in the country, including those on property, selective sales, individual income and corporate-income, according to the report. They cited New York's spending on "other and unallocable" expenses, including public welfare, hospitals, electric power, transit, and employee retirement, as another reason for its ranking.

The report created four other lists ranking freedom based on fiscal policy, regulatory policy, economic freedom and personal freedom. They did not attempt to weigh the benefits bestowed on the populace by their government and its policies.

Maryland was ranked last based on personal freedom, though it was #43 in overall freedom. The report cited Maryland's gun laws, which are the second-strictest in the country, as well as "fairly harsh" marijuana laws, extensive auto regulations, harsh gambling laws, "burdensome" homeschooling laws, high drug arrest rates and lack of status for same-sex partnerships.

The report makes policy recommendations for each state, such as proposing that Maryland legalize same-sex civil unions and strengthen medical-marijuana laws while decriminalizing low-level possession.

It is unclear how Georgia's ranking -- #15 in overall freedom, #11 in economic freedom and #31 in personal freedom -- may bode for the Obama administration's health care law. A federal appeals court in the Peach State will hear a challenge on Wednesday brought by 26 states to the constitutionality of the Affordable Care Act signed into law in March 2010.

George Mason University's report is not without its critics, however.

Carl Davis, senior policy analyst for the nonprofit group Citizens for Tax Justice, is critical of the report's "shallow and misleading" analysis of taxation when scoring a state's freedom score.

"You can't just count the number of dollars coming in," Davis said. "It's just as important to look at how those dollars are collected, and from whom, and the study makes basically no attempt to do either of these things."

But Ruger said there are two critical policy implications from the study that could have serious economic implications.

First, freer states are attracting citizens from other states while less-free states are losing citizens -- and their tax dollars.

"This is true for both economic freedom and personal freedom," Ruger said. "People are voting with their feet and moving to open, tolerant, and economically free states and away from nanny-states."

As an example, increasing points on the "freedom scale" by 0.5 points, from Connecticut to Iowa, for example, increases net migration by 5.9 percentage points, based on population figures from 2000, according to the report.

Second, Ruger said that economic freedom is associated with income growth. The study results showed that a 0.25 unit increase in economic freedom increases the average annual growth rate in personal income by about 0.25 percentage points.

Statistically speaking, South Dakota should have a growing population and increasing incomes because the state ranked first in economic freedom and second in overall freedom. Census Bureau data shows more people at least moved to South Dakota from other states (29,631) than left for another state (25,950) in 2009.