Pacific Research Institute’s Report: South Dakota Ranks No. 1 in Economic Freedom

If you have wondered where you can live without tax burdens, the Pacific Research Institute has the answer for you. According to its new report, U.S. Economic Freedom Index: 2008 Report, the best place for economic freedom is South Dakota. The authors of the report define economic freedom as the right of individuals to pursue their interests through voluntary exchange of private property under a rule of law.

The Plains state received the designation of the most economically free state because it has no corporate income tax, no personal income tax, no personal property tax, no business income tax and no inheritance tax, the report said. South Dakota’s business climate is thriving. Companies are willing to relocate there to open manufacturing plants. In addition, in 2007, the Small Business Survival Foundation ranked South Dakota as the best business climate for entrepreneurs. Forbes Magazine listed Sioux Falls, S.D., as the best smaller metro area for businesses and careers in 2008.

PRI also evaluates other areas of the country. “Our goal is to measure economic freedom across the 50 states using the methodology of the 1999 and 2004 editions,” the authors of the report wrote. Rounding out the top five are Idaho, Colorado, Utah and Wyoming. On the bottom are: New York at 50, Rhode Island at 49, New Jersey at 48, California at 47 and Pennsylvania at 46.

Since its last report, PRI noticed states gaining economic freedom and those losing freedom. Texas dropped 14 places in its ranking. Alaska, Delaware and North Carolina dropped 12 places while Arizona went down 10 spots. On the other hand, the South Dakota moved up 14 places to capture the No. 1 spot. Minnesota, Illinois and Wisconsin moved up 18, 19 and 20 places, respectively. New York and Pennsylvania maintained their status quo, the report found. While California moved up two places since Gov. Arnold Schwarzenegger, the state remains on the bottom of the rankings, the authors said.

According to the report, the Upper Midwest is enjoying a renaissance in economic freedom as evidenced by Illinois, Minnesota, South Dakota and Wisconsin. They authors also say people living in the Northeast have the least amount of economic freedom. “Virginia stands as a citadel of economic freedom in the South,” the report said. The South is in the middle of the rankings.

The report also said economic freedom is an indicator on how prosperous the states will be in the next two years. For example, in 2005, per-capita personal income grew 31 percent faster in the 15 most economically free states than in the 15 least economically free states. Taxpayers paid 14 percent less in effective tax rates in 2005 in the most economically free states than did the taxpayers in the least economically free states, the report concluded. Effective tax rates are what people pay after deductions, exemptions and credits. The rankings also will indicate how well a state will be economically, the authors wrote.

PRI failed to mention drawbacks to living in the economically free states. In South Dakota, the long winters could require high heating bills. The report also did not mention the types of companies relocating there.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

Scroll to Top