For the third year in a row, Ohio is ranked 35th out of 50 states in economic freedom according to a recent report by a group of North American free market think tanks – Columbus-based Buckeye Institute, the Canadian Fraser Institute, the Puerto Rican Instituto de Libertad Económica, and the Mexican Caminos de la Libertad. Using the most recent data available (2020), the study ranked North American states and provinces in the categories of government spending, taxation, and labor-market flexibility.
Economic Freedom in Ohio Compared to Other US States
The study found the top five states for economic freedom to be Florida (1st), New Hampshire (2nd), S. Dakota (3rd), Texas (4th) and Tennessee (5th). These states have no personal income tax. Coming in at the bottom were Oregon (46th), Vermont (47th), Hawaii (48th) California (49th) and New York (50th).
In the rankings, Ohio came in below the traditionally “blue” states of Massachusetts (26th), Connecticut (28th) Maryland (30th), Washington (31st) and Illinois (34th) in economic freedom. Among its geographical neighbors, Ohio ranked behind Indiana (11th), Pennsylvania (17th) and Michigan 32nd in economic freedom, and above Kentucky (36th) and W. Virginia (44th).
Buckeye Institute Cites Incremental Progress
In the forward of the report, Rea S. Hederman, Jr., vice president of policy at The Buckeye Institute, points to recent incremental progress in some areas while noting a need for dramatic improvements during the 2023 budget year.
Incremental progress was made in the reduction of Ohio’s personal income tax rate. Worker freedom was improved with the adoption of reciprocity for out-of-state occupational licenses held by military spouses.
Pork-filled Budget Threatens Financial Health & Recent Progress
Hederman warned that the state’s pork-filled budget continues to slow Ohio’s progress, specifically citing the bloated state-run workers compensation system, oversized pension program, and a high state-spending-to-personal-income ratio. If not addressed Hederman expects these expenditures to jeopardize Ohio’s fiscal health and all but guarantee that recent progress in income rates will need to be reversed to meet financial obligations.
Do Opportunities for Dramatic Improvements Still Exist?
In late December 2022 when the report was issued, Hederman saw dramatic opportunities for the Ohio House to reduce government spending, make responsible tax reform and promote labor market freedom heading into the 2023 budget year.
At that time, the expectation was that Representative Derek Merrin would be voted in as Speaker of the House with a supermajority of House Republicans backing his conservative legislative priorities. Just days later, 22 House Republicans renounced their pledge to back Merrin and joined forces with 32 Democrats to select moderate Republican Jason Stephens as House Speaker. That act of betrayal dashed the hope of legislative progress on many conservative issues. It begs the question, have these opportunities for economic reforms also been lost?