The index was first create for the purpose of determining how amenable each state is to the principles of individual and economic liberty, as reflected in various policies. The project develops an index of economic and personal freedom in the American states. Specifically, it examines state and local government intervention across a wide range of public policies — including income taxation, gun control, home schooling regulation, and drug policy — and comprehensively ranks the American states on their public policies which affect individual freedoms in the economic, social, and personal spheres.
Realizing that the power of the nanny state has increased and ventured into new areas, the researchers included in the 2011 index such new policy variables as bans on trans fats, audio recordings of police, the individual health-insurance mandate in Massachusetts, and mandated family leave; the index even analyzes the effect of unconstitutional and burdensome federal policies and regulations on freedom in the states. This new section assesses the consequences of the American Recovery and Reinvestment Act of 2009 (stimulus) for individual freedom, as affected by state and local policies.
Despite New Hampshire's measures such as a recent smoking ban, the index found that its:
… taxes, spending, and fiscal decentralization remain more than a standard deviation better than average, and government debt actually went down slightly. Gun laws are among the most liberal in the country, but carrying a firearm in a car requires a concealed-carry permit. Effective retail-tax rates on wine and spirits are zero. New Hampshire is the only state in the country with no seatbelt law for adults. It lacks a motorcycle helmet law but does have a bicycle-helmet law and authorizes sobriety checkpoints. State approval is required to open a private school. Home school laws are slightly worse than average; standardized testing and recordkeeping requirements are stricter than those in most states. Eminent-domain reforms have gone far. The state’s liability system is one of the best, but campaign-finance regulations are quite strict. The drug law-enforcement rate is low and dropping, while arrests for other victimless crimes are high and dropping. Asset-forfeiture law is definitely subpar, with potential for abuse.
Constitutionalists find these results encouraging, considering that New Hampshire’s state motto is "Live Free or Die." The state is headquarters of the Free State Project (according to Wikipedia, "... a political movement founded in 2001 to recruit at least 20,000 libertarian-leaning people to move to New Hampshire in order to make the state a stronghold for libertarian ideas"); and the state legislature is home to several liberty-oriented Republicans, including Rep. Laura Jones and Rep. Norman Tregenza, the latter an avid reader of The New American and member of The John Birch Society, who also led an effort to pass a resolution urging Congress to pull out of the UN and NAFTA.
South Dakota also ranked high on the Mercatus Center's Freedom in the 50 States Index — nearly tied with New Hampshire. The Mount Rushmore State is top among its fellows in terms of fiscal policy, reported the index,
... owing to its high fiscal decentralization for its size and its low levels of taxation (7.6 percent adjusted revenues as a percentage of personal income) and spending. It might be hard to improve on South Dakota’s performance in this area. It may be possible to do so by lowering sales taxes or carving out an exemption for food in tandem with a reduction in the size of the state government. On economic regulation the state scores well. Labor and health-insurance laws are generally very good, with a below-average number of health-insurance coverage mandates. The state’s liability system is among the best. Land-use planning is largely local. Eminent domain has been reformed extensively.
While the socially libertarian Mercatus Center condemned South Dakota for its positions on gambling, it is important to note that the state’s general libertarian positions on fiscal and tax matters, home schooling, and gun rights allow it to rank high in overall freedom, while it has led the country in what is perhaps the most essential libertarian issue: right-to-life matters. Honoring the inalienable right to life is a high priority in South Dakota, which has done the most of any state to crack down on abortion.
Other states making the top 10 ranking in overall freedom include (in order from 3-10) Indiana, Idaho, Missouri, Nevada, Colorado, Oregon, Virginia, and North Dakota.
At the very bottom of the list, however, are New Jersey and New York — with the Empire State ranking dead last. The index explains:
New York is by far the least free state in the Union. It has also experienced the most interstate emigration of any state over the last decade. New York has by far the highest taxes in the country. Property, selective sales, individual income, and corporate-income taxes are particularly high. Spending on public welfare, hospitals, electric power, transit, employee retirement, and “other and unallocable” expenses are well above national norms. Only Alaska has more government debt as a percentage of the economy. On personal freedoms, gun laws are extremely restrictive, but marijuana laws are better than average, while tobacco laws are extremely strict, and cigarette taxes are the highest in the country. Motorists are highly regulated, and home-school regulations are excessive, but non-drug victimless-crimes arrests are low. New York has the strictest health-insurance community-rating regulations in the country, which have wiped out the individual market. Mandated coverages are worse than average but were actually cut back substantially in 2007–2008. Eminent domain abuse is rampant and unchecked. Perversely (in our view), the state has stricter contribution limits for grassroots PACs than for corporate and union PACs. On the positive side, occupational licensing is somewhat better than average.
The Mercatus Center recommends that New York reduce the burdensome testing, notification, and recordkeeping requirements on home-schoolers; lower taxes; cut spending in all areas; and privatize the New York Metropolitan Transit Authority (MTA), the nation’s largest public transportation system, which — because of a culture of corruption, fiscal wastefulness, reckless spending, and union pandering — went from a $3 billion surplus to a $6 billion deficit in a matter of months.
Incidentally, New York also ranks lowest in the nation for personal happiness, and lowest in terms of voter turnout. It is therefore a prime manifestation of the Aristotelian, utilitarian notion that beatitude (happiness) and individual liberty are directly correlated, as set forth in Nicomachean Ethics. John Stuart Mill’s On Liberty and Jeremy Bentham’s Principles of Morals and Legislation also attest to this truth. Numerous empirical research studies agree. For instance, Arthur Brooks, in his book Gross National Happiness, notes that two-thirds of Americans still define freedom in terms of doing what they want, being able to make their own choices, or having liberty in speech and religion. He cites the nationwide General Social Survey, which revealed that people who said that they felt completely or very free were twice as likely to say that they were very happy about their lives as those who felt only a moderate degree of freedom, not much, or none at all. Even when holding income, sex, education, race, religion, politics, and family status constant, we find that people who felt free were about 18 percentage points more likely than others to say that they were very happy.
Freedom is also positively correlated with voter participation; disaffected citizens who feel oppressed by overarching state power are less likely to be excited about civic engagement than those whose government exists solely to protect their inalienable rights and freedoms. This research was also conducted by George Mason University’s United States Election Project, which ranked New York and New Jersey in the bottom five states for voter turnout in 2010, while South Dakota (the second freest state in the country) ranked in the top five states in that category.