Policy Recommendations
- Fiscal Trim areas with above-average spending levels, like public welfare, parking lots, and public buildings. Reduce numerous minor taxes that are relatively high by national standards.
- Regulatory Free nurses by increasing independent practice authority for nurse practitioners and joining the Nurse Licensure Compact.
- Personal Enact broad-eligibility education savings accounts and unburden private schools and homeschools from paternalistic regulations.
Analysis
The Keystone State is freer than all its neighbors and also better than most other states. Pennsylvania does particularly well on fiscal policy, where it is a top-five state. Regulatory policy drags down the commonwealth’s economic freedom score and is an area ripe for improvement. Pennsylvania also suffers from a middling record on personal freedom, coming in at number 34.
Fiscal policy is the dimension where Pennsylvania has done best. Pennsylvania’s overall tax burden is about average, but the state is a bit more fiscally decentralized than average, with local governments making up a large share of the total tax take. The tax burden is about where it was in 2000, though slightly more of that is state versus local taxation. State and local debt is higher than today’s average, and financial assets are lower, but public employment is much lower than average (9.0 percent of the private workforce), and so is government share of GDP (7.2 percent of adjusted income).
Pennsylvania ranks a woeful 37th on regulatory policy. It is mediocre on land-use freedom. However, it is better than most northeastern states, a fact that economist William Fischel attributes to the state supreme court’s 1965 and 1970 cases striking down of minimum lot sizes and other zoning regulations that have exclusionary intent. One of our measures shows slight improvement in zoning over time, whereas the other (court cases) shows marked deterioration. Pennsylvania is the rare state that mandates free speech on some private property. The state is not as bad as most other northeastern states on labor-market regulation, but it lacks a right-to-work law and has avoided raising the minimum wage above federal minimums. Pennsylvania has banned managed care health coverage since the 1990s, but insurance mandates are relatively low. By most measures, occupational licensing is not very extensive in Pennsylvania, but nurses enjoy little practice freedom. Insurance freedom is low, with prior approval of homeowner’s insurance rates and rating classification prohibitions. In 2016, personal automobile insurance rates were slightly liberalized, but this reform was clawed back in 2018. The state has a general sales-below-cost law and an anti-price-gouging law. The civil liability system is much worse than the national average. The state has partisan judicial elections and has made only timid efforts at tort reform.
Pennsylvania is mediocre on criminal justice policy. Rising crime-adjusted incarceration rates bottomed out in the 2009–13 period before getting better since and are now slightly higher than the current national average. Nonviolent victimless crime arrests have been down since 2004–05 and are now below average. Drug arrest rates have also improved during the past decade. Civil asset forfeiture was reformed for 2017 and Pennsylvania is now the 13th best state in the country. Pennsylvania has enacted a modest medical marijuana law but has not decriminalized low-level possession. Gun rights are much better respected than in many other states, with carry licenses affordable and not terribly restricted, all Class 3 weapons legal, and a right to defend oneself in public legally recognized in 2011. Since legalizing casinos in 2007, Pennsylvania has risen to become one of the best states in the country for gambling liberty—except for home poker games. It has also legalized sports betting. Pennsylvania is one of the worst states for alcohol freedom. A notoriously inefficient state bureaucracy monopolizes wine and spirits. Wine markups are especially high. However, direct wine shipments were legalized in 2016. On education, Pennsylvania has a long-standing and liberal tax-credit scholarship program, but it has fallen behind other states. Private schools and homeschools are tightly regulated. Smoking bans have gone far but are not total. Cigarette taxes, though, are draconian at $2.60 a pack.