#14 Texas

 
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Economic freedom includes fiscal and regulatory policy.

 
#14
 
Economic
Change
-8
From 2009

Texas State Overview

State Facts


Net Migration Rate (?) 4.2 % 
Personal Income Growth (?) 2.55 %
How does the freedom ranking relate to these?

Analysis

Texas prides itself on being a freedom-loving state, and at 14th in rank its citizens have something to be proud of. However, its policies are sometimes not as consistent with individual liberty as the rhetoric of its officials and citizens would suggest. Like many southern states, Texas performs better on economic freedom than personal freedom. Yet despite its reputation as a low-regulation state, it is only average for regulatory policy—while it is above average for fiscal policy.

Texas enjoys one of the lowest tax burdens in the country. It also does better than average on state spending, fiscal decentralization, and government employment relative to the private sector. However, state and local debt is high (with most of the problem arising at the local level).

Texas is first in the country in terms of labor market freedom. It is a right-to-work state and remains the only state not to require employers to contribute to workers’ compensation coverage. Indeed, it has excellent workers’ compensation laws overall. While Texas has only light community rating and no individual rate review, it has imposed mandated coverages on health insurance that add significantly to the cost of insurance premiums (it is two standard deviations above the mean on them). Texas led on telecom and cable deregulation. It has also passed eminent domain reform and performs well on land-use regulation. The state’s liability system is below average, however.

Texas’s personal freedom rank is mediocre. The state’s asset forfeiture and gaming laws are about average. Alcohol is less regulated than in most other states, and beer, wine, and liquor taxes are low. Gun control is better than average, though the state falls short on open-carry laws. Private and home schools are almost completely unregulated. Texas has average cigarette taxes but slightly less restrictive smoking bans than many other states. Texas also has relatively light restrictions on motorist freedoms; it does not authorize sobriety checkpoints or have helmet laws. However, the Lone Star State fares quite poorly on a number of policies in the personal freedom dimension that drag down its rating. Texas’s marijuana laws are quite harsh—nearly a standard deviation worse than average. One bright spot is that low-level marijuana cultivation is only a misdemeanor. It is also one of the worst states in terms of freedom from victimless crimes, including drug arrests. Just bringing the crime-rate-adjusted incarceration rate to the national mean would have put Texas at 11th overall, but this is unlikely to happen anytime soon.

Policy Recommendations

  • Tighten standards for local government debt issuance. In particular, increase transparency concerning local debt burdens until it is consistent with the recommendations of the Texas Comptroller of Public Accounts and ban local governments from using capital appreciation bonds.1
  • Improve the liability system by switching from elected to appointed judges.
  • Mimic liberal states like Vermont and Washington and allow open carry of handguns without a permit.
1. Chuck DeVore, “CAB Rides Can Be Extremely Costly,” Austin American-Statesman, September 11, 2012, http:// www.statesman.com/news/news/opinion/devore-cab -rides-can-be-extremely-costly/nSLLC/.
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