By Kelly McCutchen

Atlanta – Georgia enjoys higher economic growth and its citizens earn higher incomes relative to most other states thanks to lower levels of government regulation and greater economic freedom, the National Center for Policy Analysis (NCPA) and Canada’s Fraser Institute reported today.

The annual North American Index of Economic Freedom found that Georgia tied with Nevada and North Carolina as the 10th most free state. Six of the top 10 states were in the South. Ahead of Georgia in the 2005 Economic Freedom Index were Delaware, Tennessee, Florida, Arizona, New Hampshire, Virginia, Texas, South Dakota and Colorado.

The annual study ranks states based on the degree of economic freedom by examining three principal factors: 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.

“As the report concludes, economic freedom drives growth and prosperity,” noted NCPA President John Goodman. “This index is important because, with few exceptions, changes in prosperity closely follow changes in economic freedom.”

Delaware remains at the top of the index for the third straight year and West Virginia is 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.

This year’s rankings represent a marked improvement for North Dakota, which jumped to 27th from 34th, and Maryland, which improved to 16th from 21st. But Oklahoma fell seven spots to 3636 and Illinois fell from 15th to 21st.

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

The study cites Georgia’s “solid ratings on most measurements of economic freedom.” Especially noteworthy, the state ranked third for labor market freedom, its 13th straight year in the top 10.

“This report shows the road to Georgia’s growth and prosperity,” said Kelly McCutchen, executive vice president of the Georgia Public Policy Foundation. The Foundation is an independent, state-based think tank that actively supports private enterprise and limited government.

“To keep up with our neighboring states and continue to create jobs and opportunity for our citizens, Georgia must continue to focus on reducing state and local tax and regulatory burdens,” McCutchen added.

The full study is available here. For further information, contact Kelly McCutchen at 404-256-4050 or e-mail kmccutchen@gppf.org.