Economic Freedom of North America

Economic Freedom of North America

November 9, 2006 Posted by J. Scott Moody - No Comments

One feature lacking in the public policy discussion in Maine are comparisons made with Canada. This is surprising given that Maine shares a longer border with Canada than with the rest of the United States. As such, Maine competes not only with the rest of New England but also with Canada’s eastern provinces such as Quebec, New Brunswick, Nova Scotia, Prince Edward island and Newfoundland and Labrador. While statistical comparisons can be tricky–though it has gotten better with the new North American Industrial Classification System put in place by the North American Free Trade Agreement–it is MHPC’s goal to bring Canada into our comparative studies whenever possible.
Fortunately, there are studies that already do such U.S./Canadian comparisons. One important study is the “2006 Economic Freedom of North America” report published by The Fraser Institute in Vancouver Canada. The study finds that the “The statical results of this year’s study persuasively confirm those published by the previous three editions: economic freedom is a powerful driver of growth and prosperity. Those provinces and states that have low levels of economic freedom continue to leave their citizens poorer than they need or should be.”


The results of their study finds: “The econometric testing shows that a one-point improvement in economic freedom on the all-government index increases per captia GDP by U.S. $5,448 for U.S.states and by U.S. $3,916 (C$5,483, using a conversion rate of 1.40) for Canadian provinces. On the subnational index, a one-point improvement in economic freedom increases per-capita GDP by U.S. $4,326 for U.S. states and by U.S. $3,251 (C$4,552) for Canadian provinces.
Maine ranks 47th in the index (out of 60 states/provinces). Maine fares better against our Canadian neighbors of New Brunswick (56th), Nova Scotia (56th) and Quebec (59th), but less well against our U.S. neighbors of New Hampshire (8th), Massachusetts (12th), Connecticut (19th), Vermont (39th) and Rhode Island (44th).
Overall, the report concludes this about Maine: “Maybe it’s the winters but Maine continues to give a cold shoulder to economic freedom’s sunny overtures. The state has never been above 40th in either of the overa-all categories and, in 2003, stood at 47th all-government and 50th subnational. The breakdowns were just as gloomy: size of government 47th and 46th, respectively; takings and taxation 51st and 55th; and labor market freedom was 43rd in all0government and 41st in subnational measurements. Maine hits residents with the second-highest state and local tax burden, at 12.3%, and has the fifth-highest tax rate when the federal burden is added. At 5%, the state sales tax is below that of the top-tier states (6% and above).”