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Hawaii slips further in economic freedom index

Hawaii ranks 48th in the nation in terms of economic freedom, according to the latest “Economic Freedom of North America” report produced by the Fraser Institute in Canada.

The ranking was based on data from 2020 and represents a decline from 44th in 2019.

Helping drive Hawaii toward the bottom were its “zero” scores for “sales tax” revenue as a percentage of income and labor union density — the lowest scoring state in both categories. 

It also performed abysmally in terms of insurance and retirement payments as a percentage of income.

The Aloha State also came in last place in the overall category of regulation, tying with Maine.

Components of the “regulation” category include Hawaii’s minimum wage law, government employment as a percentage of total state employment and union density.

Keliʻi Akina, president and CEO of the Grassroot Institute of Hawaii, said Hawaii’s position in the ranks of economic freedom “will not improve until lawmakers reduce the state’s high tax burden and rein in government spending. As long as these issues go unaddressed,” he said, “our residents will continue to suffer and flee the state.”

The least free state, according to the report. was again New York, followed by California, Hawaii, Vermont and Oregon. 

Florida was ranked the most economically free, moving up from third place last year. New Hampshire, last year’s first-place state, moved to second place, followed by South Dakota, Texas and Tennessee. 

“Economic freedom is the only sure path to prosperity,” Akina said. “This latest EFNA report proves that financial success is not guaranteed by oil resources or a bustling tourism industry. Government interference in the free market will stymie growth and progress at most every turn.”

Released annually by the Fraser Institute, an independent public policy research and educational organization based in Canada, the EFNA report ranks all 92 provinces and states in Canada, the United States and Mexico in two ways.

Looking at the three nations individually, the states or provinces within each county are compared against only each other, based on 10 variables in the areas of government spending, taxes and regulation. 

The second measure compares the states and provinces according an “all-government” index that includes government spending, marginal income and payroll tax rates, and regulations imposed on the credit market and businesses. It also considers the legal systems and property rights, sound money and freedom to trade internationally. 

This latter index is so the states and provinces across North America can be more fairly compared with each other across country lines.

In the all-governments” index, Hawaii shared its rank of 49 — the same as last year — with New York. Delaware is the only U.S. state ranked worse, standing at 52. 

Helping drag down Hawaii’s all-government ranking were its level of government spending and its high taxes. On the other hand, it scored higher in terms of freedom to trade internationally and its sound money provisions, likely keeping it from ranking even lower.

The 2022 EFNA report was written by Dean Stansel, economics professor at Southern Methodist University; José Torra, head of research at the Mexico City-based Caminos de la Libertad; Fred McMahon, economist with the Fraser Institute; and Ángel Carrión-Tavárez, director of research and policy at the Instituto de Libertad Económica in Puerto Rico.

A full copy of the U.S. version of “Economic Freedom of North America 2022” can be downloaded here. More information, including an interactive map and the entire downloadable dataset, can be found here.

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