Policy Recommendations
- Fiscal Build up state and local cash assets and cut sales taxes.
- Regulatory Repeal the minimum wage and end the ability of the ballot initiative to impose uncompensated regulatory burdens on the state’s residents.
- Personal Legalize for-profit casinos and card games.
Analysis
Since 2008, Arizona has risen steadily in the freedom rankings, reaching its zenith to date of fifth place in 2020 and holding that rank for three years straight. The rise has been most notable on fiscal policy and personal freedom.
Fiscal policy was long more of a problem than regulatory policy, but the two have switched places since 2016. State and local taxes are 9 percent of adjusted personal income, well below average. The state depends heavily on sales taxes, permitting generally low individual and business income taxes. Arizona has very little scope for choice among local jurisdictions. Although municipalities are more important than counties, there are only 91 municipalities in the whole state. Debt and government consumption are well below average, and so is government employment, at only 9.8 percent of the private sector. All these measures have fallen over time. The biggest recent two-year gains in fiscal freedom came in 2013–2014 and 2019–2020.
On regulatory policy, Arizona is one of the best in the country with regard to anti-cronyism. In most industries, business entry and prices are quite liberalized. However, occupational licensing has been a long-term weak spot, which recent reforms haven’t rolled back. The state has no certificate-of-need laws for hospital construction or movers. The right-to-work law probably attracts manufacturing businesses, and the state passed statewide cable franchising in 2018. It has one of the highest effective minimum wages in the industrialized world because of Proposition 206, which was passed by popular vote in 2016. That law meant a rise from $8.05 per hour to $10.00 per hour, with subsequent increases all the way up to $13.85 in 2022. It also has an E-Verify mandate. Although land-use regulation tightened in the 1990s and early 2000s, a regulatory takings initiative may have curbed its growth a little since 2006.
Arizona’s personal freedom improvements are due to growing gun rights (constitutional carry passed in 2010), medical marijuana in 2010 and recreational marijuana in 2020, school vouchers (passed in 2012 and expanded to universal school choice in 2022), declining victimless crime arrests, declining incarceration rates since a 2015 peak, the abolition of its sodomy law because of the Supreme Court decision in the judicial legalization of same-sex marriage, liberalization of its wine shipment laws, and significant asset forfeiture reforms in 2017 and 2021. On the other side of the ledger, Arizona’s cigarette taxes are higher than average, and smoking bans have become comprehensive and airtight. (The latter, like the state’s minimum wage, is explained in part by the ballot initiative, which really does result in some observable “tyranny of the majority.”) Not much change has been observed in alcohol freedom, where the state is better than average. On gambling, the state did legalize online sports betting but is otherwise lower than average.