Policy Recommendations
- Fiscal Cut spending on the “miscellaneous” category and income and property taxes.
- Regulatory End rent control, especially given its unintended consequences on housing quality and quantity.
- Personal Fully free wine sales from the currently arcane regulatory system.
Analysis
About 60 years ago, New Jersey was considered a tax haven. It grew wealthy under that regime, but during the past two decades it has dwelled in the bottom five for economic freedom. In 2000, New Jersey was a relatively good state for fiscal policy, scoring 10th best, but it has declined since and is now middling at number 34. The Garden State is a regulatory nightmare, coming in dead last; it performs poorly on personal freedom as well. As long as it is better than New York on fiscal policy and not much worse than Connecticut, it will probably continue to get tax refugees from the former state, but more New Yorkers now move to Florida than to New Jersey. Plus, Connecticut is outpacing New Jersey in freedom.
New Jersey’s state-level taxes were basically average for many years but have crept up and are now well above average at 7.4 percent. Local taxes have gone the other way, trending downward to 4.9 percent (but still well above the national average of 3.7 percent). The combined tax rate is quite high relative to the rest of the country but still lower than New York’s. New Jerseyans have more choice of local government than residents of any other state, with 6.3 effective competing jurisdictions per 100 square miles, which may imply that many residents are content with high local taxes and services. Government debt has now fallen to a slightly below average level (14.7 percent of income), but cash and security assets are well below average as well (12.7 percent of income). The government employment ratio and government GDP share have both improved significantly since the Great Recession and are better than average.
New Jersey ranks 50th on regulatory policy for good reasons. Land-use freedom is quite limited in New Jersey, with no state faring worse. The state lets cities adopt rent control, and local zoning rules are often highly exclusionary, even though the state is no longer a major destination. It has mandated speech on private property, such as malls and community associations. Renewable portfolio standards are among the highest in the country, raising electric rates. It does have a state “builder’s remedy.” In 2013, the state adopted a minimum wage that has suffered big hikes recently. Labor-market freedom was already bad because of strict workers’ compensation rules, mandated short-term disability insurance, mandated paid family leave, no right-to-work law, and a stricter-than-federal anti-discrimination law. Health insurance mandates are extensive. In 2018, New Jersey even legislated a state-level individual health insurance mandate. New Jersey has had no telecommunications deregulation, but it has statewide video franchising. Occupational licensing is more extensive than average. In 2013, nurse practitioner freedom of independent practice was abolished despite more states going in the other direction. However, New Jersey recently became a member of the Nurse Licensure Compact, and physician assistants have long enjoyed prescribing authority. Insurance rate regulation is strict, and the state has a price-gouging law, which former governor Chris Christie deployed after Hurricane Sandy to devastating effect. The Tesla direct-to-consumer sales model is legal. The civil liability system is middling.
New Jersey personal freedom is limited but has improved to 35th from 47th only a few years ago. Criminal justice has been a rare high point for the state, ranking 12th. Incarceration and nondrug victimless crimes arrest rates are low and have fallen since 2000, but drug arrests remain high despite some recent declines. The state did slash prison collect phone call rates in 2015 and stopped suspending driver’s licenses for nondriving drug offenses in 2019. Asset forfeiture, however, has been reformed little and the state comes in second to last. New Jersey is a bad state for tobacco freedom and gun rights, but it is decent on gambling (perhaps not as good as might be expected). The state was a pioneer in sports betting—even winning a Supreme Court case on the issue. The picture on educational freedom is mixed but below average. Homeschools and private schools are barely regulated, but Milton Friedman’s home state desperately needs a serious school choice program. Cannabis freedom was mixed but improved significantly with the passage (and fulfillment) of Question 1 in 2020 and the legalization of marijuana. Alcohol freedom is a bit above average, but the state interferes here too. Taxes are modest, but direct wine shipment is tightly regulated, and the rules on when a grocery store may sell wine are complicated—perhaps to create a “toll booth” where state politicians can extract rents. Fireworks freedom improved in 2017, physician-assisted suicide was legalized in 2019, and driver’s licenses are now available to people without a Social Security number.