#1 New Hampshire

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Fiscal policy consists of categories for taxes, government employment, spending, debt, and fiscal decentralization.

From 2012

Top 5 States

State Facts

Net Migration Rate (?) 2.2 % 
Personal Income Growth (?) 1.91 %
How does the freedom ranking relate to these?


New Hampshire is overall the freest state in the Union, combining relatively high scores on both personal and economic freedom. In the more distant past, it was one of the leading states on economic freedom. It fell well back of the lead in 2007–8, but since then has clawed its way halfway back from where it had sunk. The three states of northern New England still pose a stark contrast in economic policies and, for most of the late 20th and early 21st centuries, economic outcomes.

New Hampshire’s government taxes less than any other state but Alaska. We show a decline in state taxes as a share of personal income from 3.7 percent in FY 2000 to a projected 2.8 percent today. Meanwhile, local taxes have risen from 3.9 percent of income in FY 2000 to 4.8 percent in FY 2012. New Hampshire is therefore a highly fiscally decentralized state. Granite Staters have quite a wide choice in local government, with two and a half competing jurisdictions every 100 square miles. Government subsidies, debt, and employment are all lower than average, and in all those categories we see improvements between 2010 and 2014.

New Hampshire’s regulatory outlook is not so sunny. Its primary sin is exclusionary zoning. It is generally agreed that the Granite State is one of the four worst states in the country for residential building restrictions. Part of the problem might be the absence of a regulatory taking law. However, the eminent domain law is strong. On labor-market freedom, New Hampshire is below average primarily because of the absence of a right-to-work law and of any exceptions to the workers’ compensation mandate, and it has no state-level minimum wage. A telecom deregulation bill was passed in 2011–12, but the state has not yet adopted statewide video franchising. New Hampshire is above average on occupational freedom solely because the health professions enjoy broad scope of practice; the extent of licensing grew significantly during the 2000s, and the state is now below average on most indicators of licensing extent. Insurance freedom is generally better than average, except for some rate classification prohibitions. The hospital certificate-of-need law was abolished in 2011–12, but only effective in 2016, so we code it as still being in force. Otherwise, the state has steered laudably clear of entry and price regulation. The civil liability system is far above the national average; punitive damages were abolished long ago.

New Hampshire is personally relatively free. Incarceration rates and drug arrest rates are low. Nondrug victimless crime arrest rates are only about average, however. The state was one of the first to enact same-sex civil unions and then marriage through the legislative process. However, the civil asset forfeiture law is below average, and equitable sharing revenues are above average. Tobacco freedom is below average, as taxes are fairly high, and smoking bans are extensive. A liberal tax credit scholarship law was enacted in 2011–12, raising the state above average on educational freedom, even though there is no public school choice, compulsory schooling lasts 12 years, and private schools require state approval. Because the state has only charitable gambling, it scores below average in the gambling freedom category. Cannabis freedom is only about average. The state adopted a limited medical cannabis law in 2013–14, but the governor has dragged her feet on implementing it. Alcohol freedom is about average; the state monopolizes liquor retail and wine wholesale, but the effective tax rate is extremely low. Grocery stores carry wine but not spirits. It is one of the best states in the country for gun rights, especially when it comes to lack of restrictions on open and concealed carry.

Policy Recommendations

  • Fiscal: To go yet further in fiscal decentralization, amend the constitution to give the legislature the right to define an adequate education, then reduce the statewide property tax and state aid to local school districts.
  • Regulatory: Review local zoning ordinances, and strike down those that increase the price of new housing beyond that needed to pay for the cost of new infrastructure.
  • Personal: Reform asset forfeiture to require a criminal conviction and to end equitable sharing that circumvents state law.
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