A new study from the Pacific Research Institute shows that with free market policies grow much faster than states with excessive government. In addition to faster growth, the more libertarian states benefit from a "brain drain" and also enjoy a Laffer Curve effect of more tax revenue. A Wall Street Journal column summarizes key finding from the report:

Now new data is out and it shows that the states that embraced supply-side tax cuts are not only financially more sound and enjoy stronger economies, but they are draining residents away from the states that opted for high taxes. The Pacific Research Institute has crunched the tax numbers in all 50 states and published the "U.S. Economic Freedom Index" ranking all states according to how friendly or unfriendly their policies were toward free enterprise and consumer choice in 2004--the most recent year that comparative data is available for each state.

...In 2005, per capita personal income grew 31% faster in the 15 most economically free states than it did in the 15 states at the bottom of the list. And employment growth was a staggering 216% higher in the most free states. It hasn't been a "jobless recovery" in states that have adopted pro-growth tax and regulatory policies.

...new data from the Nelson Rockefeller Institute shatters the myth that budget deficits are caused by supply-side policies. In 2005, the 15 states with the most economic freedom saw their general fund tax revenues grow at a rate more than 6% higher than the 15 least free states, despite their lower effective tax rate. Instead of blowing a hole in state budgets, lower tax rates rewarded productivity and risk-taking and allowed the economy to grow. As the economy expanded it also generated more revenue for the state Treasury as capital and people flowed in. Census data shows an astounding 245% difference in net state-to-state migration rates in 2005 between the freest states (net inflow) and least-free states (net outflow).

Dan Mitchell is the Heritage Foundation's chief expert on tax policy and the economy, Dan Mitchell advocates supply-side tax cuts and fundamental tax reform.

Free market states out-perform big government states PRI in the News By: Dan Mitchell 5.19.2006