Hawaii fares poorly in ‘economic freedom' ranking

by Melissa Newsham, Grassroot Institute, Jan 11, 2024

Hawaii is one of the worst states in the nation in terms of economic freedom, according to the annual “Economic Freedom of North America” report released by the Fraser Institute, based in Vancouver, Canada.

The independent public policy think tank ranked Hawaii 46th among all 50 U.S. states and the territory of Puerto Rico, as of 2021 — though, on the upside, that represents a modest improvement from 48th in 2020. 

The Fraser Institute says the freest economies operate with minimal government interference, relying upon personal choice and markets to answer basic economic questions such as what to produce, how to produce it, how much to produce, and for whom the production is intended. 

For the 15th year in a row, New York was ranked the least economically free by the Fraser Institute, followed by Vermont and California  — tied for 48th — and Oregon. 

Hawaii has consistently been among the “least free” quartile of states since 2011. 

The most economically free state in the nation was New Hampshire, followed by Florida, Tennessee, Texas and South Dakota. 

The Fraser Institute’s comprehensive report evaluates jurisdictions on a 10-point scale across 10 variables related to government spending, taxation and regulations. 

Hawaii performed well in the area of “transfers and subsidies” as a percentage of income, defined as the amount government taxes one group to give to another, ranking third in the nation. But that was about all Hawaii could brag about.

Of particular concern were its scores for “labor union density” and “insurance and retirement payments as a percentage of income,” scoring 0 and 0.53, respectively.  

Hawaii has often been lauded for its low property tax rates, but its score in the category of “property tax and other taxes as a percentage of income” dropped from 6.54 last year to 6.27, placing it 26th in the nation. 

The state ranked second to last place for “sales tax revenue as a percentage of income” and 49th in the overall category of “taxation,” surpassing only New York.

In addition to comparing the 50 states and Puerto Rico, the Fraser report also ranks Mexico’s 32 states and Canada’s 10 Canadian provinces. It was written by Dean Stansel, an economics professor at Southern Methodist University; José Torra, head of research at the Mexico City-based Caminos de la Libertad; Fred McMahon, an economist with the Fraser Institute; and Ángel Carrión-Tavárez, director of research and policy at the Instituto de Libertad Económica in Puerto Rico. 

A full copy of the U.S. version of “Economic Freedom of North America 2023” can be downloaded here. More information, including an interactive map and the entire downloadable dataset, can be found here.