Best & worst U.S. cities in economic freedom

Economic freedom is correlated with, and leads to, economic prosperity. The more economically free, the greater the prosperity.

The most recent research is consistent with past studies: Greater economic freedom is correlated with higher local government credit ratings, more net in-migration of population, increased overall income, and increased per capita income.*

*Dove, John. (2017). “The relationship between local government economic freedom and bond ratings,” Journal of Financial Economic Policy, 9(4):435-49.

Economic freedom depends on, and is defined by, government policies, including:

  • Government spending: expenditures, transfers, subsidies, insurance and retirement payments as a percentage of personal income.
  • Taxation: income, payroll, sales, property and other taxes as a percentage of personal income.
  • Labor market freedom: Minimum wage, government employment, private union members.

Several institutes rank U.S. states in how economically free and competitive they are, including the Tax Foundation, Mercatus Center, and Fraser Institute. But there are no rankings of cities, although economic freedom can vary quite widely within the same state.

Dr. Dean Stansel of Southern Methodist University has done just that, with a 22-page report for the Reason Foundation, “U.S. Metropolitan Area Economic Freedom Index,” ranking the economic freedom in 2012 of 382 large U.S. metropolitan areas, which he calls Metropolitan Statistical Areas (MSA), defined as a large city plus its economically relevant suburbs.

Note: Stansel is a research associate professor at the O’Neil Center for Global Markets and Freedom in the Cox School of Business at Southern Methodist University.

Those MSAs are divided into two groups:

  • 52 large MSAs with a population of one million of higher.
  • 330 small MSAs with population below one million.

These are Dr. Stansel’s findings:

(1) Economic freedom and prosperity: In 2012, the top quartile (top 25%) of MSAs in economic freedom had a per capita personal income 5.70% above the MSA average. In contrast, the per capita personal income of the lowest quartile of MSAs in economic freedom was 4.86% below the MSA average.

(2) Top 10 Large MSAs in Economic Freedom, i.e., 10 Most-Free Large MSAs:

  1. Houston-The Woodlands-Sugar Land, Texas
  2. Jacksonville, Florida
  3. Tampa-St. Petersburg-Clearwater, Florida
  4. Richmond, Virginia
  5. Dallas-Fort Worth-Arlington, Texas
  6. Nashville-Davidson—Murfreesboro—Franklin, Tennessee
  7. Miami-Fort Lauderdale-West Palm Beach, Florida
  8. Austin-Round Rock, Texas
  9. Orlando-Kissimmee-Sanford, Florida
  10. San Antonio-New Braunfels, Texas

(3) Ten Least-Economically-Free Large MSAs:

  1. Riverside-San Bernardino-Ontario, California
  2. Rochester, New York
  3. Buffalo-Cheektowaga-Niagara Falls, New York
  4. New York-Newark-Jersey City, NY-NJ-PA
  5. Cleveland-Elyria, Ohio
  6. Columbus, Ohio
  7. Portland-Vancouver-Hillsboro, Oregon
  8. Sacramento-Roseville-Arden-Arcadee, California
  9. Providence-Warwick-Pawtucket, Rhode Island
  10. Los Angeles-Long Beach-Anaheim, California

(4) Ten Most-Free Small MSAs:

  1. Naples-Immokalee-Marco Island, Florida
  2. Midland, Texas
  3. Sebastian-Vero Beach, Florida
  4. Sioux Falls, South Dakota
  5. Manchester-Nashua, New Hampshire
  6. The Villages, Florida
  7. Tyler, Texas
  8. Crestview-Fort Walton Beach-Destin, Florida
  9. Pensacola-Ferry Pass-Brent, Florida
  10. San Angelo, Texas

(5) Ten Least-Free MSAs:

  1. El Centro, California
  2. Kingston, New York
  3. Visalia-Porterville, California
  4. Binghamton, New York
  5. Glens Falls, New York
  6. Ocean City, New Jersey
  7. Merced, California
  8. Yuba City, California
  9. Atlantic City-Hammonton, New Jersey
  10. Vineland-Bridgeton, New Jersey

As you can see from the above lists, states with no income tax (Florida, Texas) tend to have MSAs that are most economically free, whereas the least free MSAs are found in states known for their socialist governments (California, New York, Oregon, New Jersey).

(6) U.S. Map of Economic Freedom of MSAs:

See also “Chicago tops list of 50 cities Americans are abandoning”.

~Eowyn

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Tim SheyBest & worst U.S. cities in economic freedom - Free World Economic ReportAuntie LuluDr. EowynAlbe Recent comment authors
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TrailDust
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Thank you for this informative article, Dr. Eowyn. On your map, the visual contrast of the red-dominated California and NewYork, to the blue-dominated Texas and Florida, is very revealing!

Albe
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Albe

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Auntie Lulu
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Auntie Lulu

How pitiful–it comes as no surprise that Portland, Oregon is among the list of ten LEAST ECONOMICALLY FREE areas. This is a direct result of the Socialist-Communist influence of our City, County and State politicians. This is a beautiful area, but it is severely spoiled by these influences. We get folks fleeing Communist California . . . but they bring with them the ideas of the leftists. They bring these ideas and get draconian laws instituted and they screw up an otherwise wonderful area.

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Tim Shey
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I have hitchhiked through Idaho County, Idaho many times over the years; Grangeville is the county seat. One time this guy picked me up and he was originally from Tennessee. He told me that he did some research on the counties with the most freedom in the United States. The criteria were low taxes, freedom to bear arms, little or no building codes and a few other things. He told me that Idaho County was one of the best counties in the United States for freedom.