With July 4th Near, Is California Land of the Free?
The Fourth of July holiday brings Americans together to celebrate their liberation from Great Britain over hot dogs, hamburgers, and fireworks, but it also serves to remind us about freedom; thus, it would only be fitting to take a look at how free the nation's largest state is. Unfortunately, for Californians, the answer isn't as celebratory as the picnics many will be having on Friday and Saturday.
Using the Freedom in the 50 States index compiled by George Mason University's Mercatus Center, it easily becomes apparent that across the three categories of freedom - fiscal, regulatory, and personal -California is at or near the bottom of the pack in the U.S. Moreover, California is trending in the wrong direction.
Fiscal Freedom: To determine fiscal freedom, Mercatus examines the level of government debt, spending, and employment, the degree to which the state is fiscally decentralized, and the state's tax burden. In the most recent rankings, California ranked 44th in the nation on fiscal freedom, representing a 6 spot drop since 2001. Driving California's poor fiscal freedom performance is the state's tax burden, where the Golden State ranks 45th. This shouldn't be surprising. Of the four main taxes - income, corporate, sales, and property - California's personal income taxes, corporate taxes, and sales taxes are among the highest in the country. Interestingly, California performs fairly well in the other fiscal freedom sub-categories, suggesting that California could significantly improve its fiscal freedom if it seriously addressed tax reform.
Regulatory Freedom: Regulatory freedom examines the state's liability system, labor markets, and a host of regulatory regimes. On this metric, California performs the worst in the nation and one spot worse than in 2001. Across the board, California ranks poorly in the sub-categories, suggesting significant improvement is necessary. This is a prime area Sacramento should invest more time reforming instead of its normal approach, which is to add to California's regulatory regime rather than subtract or reform them. A good starting point is California's liability system and property rights. The state has a rampant lawsuit environment driven largely by the complexity and breadth of regulations that enable trial attorneys to catch businesses and individuals unaware. Moreover, eminent domain abuses, wide-reaching rent control laws, and out-of-control land-use regulations threaten property owners, while also exacerbating the state's housing unaffordability crisis.
Personal Freedom: Personal freedom is the catch-all category that tries to determine how freely individuals can make choices about their own lives. This includes rules regarding alcohol, marijuana, and tobacco purchases and consumption while also addressing marriage rights, general civil liberties, gun control, and school choice. California is again near the bottom in this area, ranking 47th in 2011, down 3 spots from 2001. However, on this area, California has a split personality; on some issues California performs strongly - such as on marriage, marijuana, and asset forfeiture by enforcement officials - but in other areas - like gun control, civil liberties, gambling rights, and rules related to travel - the state ranks at or near the bottom, pulling California's ranking down. While there is no one reform California could pursue to improve personal freedom, this area should be at the forefront for Sacramento while legislating. While rules surrounding personal behavior are crucial to ensure a well-functioning economy and society, California's cacophony of rule-making - both by legislators and by bureaucratic state agencies - have become so burdensome it could be argued that the state is no longer functioning well.
Overall, California ranks 49th in the nation, which is concerning given California's importance both in the nation's economy and in the direction of national policy-making. Hopefully, as the state legislature prepares to go on its summer recess and to celebrate the July 4th holiday, they can reflect on whether California is sticking true to the "life, liberty, and pursuit of happiness" ideals that the signers of the Declaration of Independence aimed to fulfil when they bravely decided to revolt against tyranny in the name of freedom.