George Mason University’s Mercatus Center recently ranked the states according to economic and personal freedom. Once again, Arizona ranks in the middle of the pack with California dragging up the rear. Arizona ranks 22nd best in overall freedom; California ranks 48th. But before we congratulate ourselves for being better than California, let’s ask ourselves if we can afford to stay in the middle.
According to the Tax Foundation, we’re below the middle in having a positive business tax climate, at 34 after falling from 28. In 2009, we ranked 38th lowest in total state and local tax burden, not too bad, but still worse than regional competitors New Mexico, Colorado, Texas, and Nevada. Recent tax increases could not have helped our ranking. Arizona was 23rd best in the 2010 Forbes “Best States for Business” ranking, up from 36th, but still in the middle.
Folks, we can’t afford to be in the middle. We need the lowest taxes, least regulation, and best business climate in the nation. Here’s why: we’re isolated and our nearest big neighbor is economically imploding. Texas is doing well because it’s big, has a lot of people, is closer to lots of other people, has relatively little regulation (though Mercatus says we do better in that category), and has very low taxes.
Arizona is isolated with only 7.1 million people (not counting Mexico) within 250 miles of Phoenix. New York City has 52.4 million people within 250 miles. Atlanta has 24 million, Chicago has 27 million, Dallas has 23 million. We may feel like we’re not isolated because California is huge and right next door, but Los Angeles’s 250 mile radius overlaps our own and only has 25 million people in it, which isn’t that big after all.
Virginia, Indiana, Florida, Texas, Missouri, Tennessee, and Georgia are all economically freer and more accessible to the bulk of the U.S. market than Arizona. We’re isolated from the most populous part of country and we have no access to inexpensive water transportation. To compete, Arizona must become the next Hong Kong.
Dr. Byron Schlomach is the director of the Goldwater Institute’s Center for Economic Prosperity.
Mercatus Center: Freedom in the 50 States
Tax Foundation: State Business Tax Climate Index Rankings, 2006 - 2011
Tax Foundation: State-Local Tax Burdens and Ranks by State, 2009