#27 Colorado

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Economic freedom includes fiscal and regulatory policy.

From 2012

State Facts

Net Migration Rate (?) 7.9 % 
Personal Income Growth (?) 1.65 %
How does the freedom ranking relate to these?


Colorado has long been one of America’s freer states, but its economic and personal freedom trajectories have diverged relative to the rest of the country since 2007.

Colorado’s overall tax burden is a little lower than the national average, but state-level taxes have crept upward since FY 2009. Local tax revenues, meanwhile, peaked in FY 2009 and fell back slightly to FY 2012. Although fiscal decentralization is high when measured as the ratio of local to state taxes, there isn’t much choice of local government, given the importance of counties and the paucity of incorporated cities. Subsidies are about average, and debt is a little higher than average. State and local employment is lower than average but has risen by quite a bit since 2000, now amounting to 12.4 percent of private employment.

Colorado does generally well on regulatory policy—it is one of the top states on our freedom from cronyism index. It earns its score on the latter through its relatively open occupational licensing system, including broad scope of practice for health care professionals and lack of a certificate-of-need law for hospitals. However, it does require household goods movers to get certificates of public convenience and necessity, bans Tesla’s direct sales model, prohibits price increases for pharmaceuticals during emergencies, and proscribes all “unfair” pricing in gasoline specifically and in other industries. Its legal regime for torts is much better than average. In 2013–14, it deregulated telecommunications somewhat, though it still lacks statewide video franchising. It is a little below average on labor-market freedom, with no right-to-work law and a minimum wage. It has remained freer for new housing construction than most other states with significant amenities driving demand. However, its renewable portfolio standard for electricity is much stricter than the national average and probably results in higher rates.

Colorado started out personally freer than the average state in 2000 and is now among the personally freest states. It has led the way with recreational cannabis legalization, which occurred in stages from 2012 to 2014. Legal gambling has gradually expanded over the past 14 years. Gun rights are generally secure, despite an insignificant decline in 2013–14, but the qualifications for carry licensure are fairly strict. The state asset forfeiture law is good, though local agencies frequently circumvent it with equitable sharing. Crime-adjusted incarceration rates are above the national average, but drug arrest rates are low and declining. The state enacted civil unions in 2013 and then was judicially granted same-sex marriage in 2014. Educational freedom is somewhat below average, as there are no private school choice programs.

Policy Recommendations

  • Fiscal: Trim spending on local parks, a category that excludes conservation lands. The state spends almost twice the national average (as a share of the economy). Also trim spending on unemployment compensation and on business subsidies, which are a little above the national average. Reduce taxes in these areas.
  • Regulatory: Abolish remaining entry restrictions, such as on moving companies, and price controls.
  • Personal: Require all equitable sharing revenues from the Department of Justice to follow state-level procedures for civil asset forfeiture.
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