Bottom 5 States
About 50 years ago, New Jersey was considered a tax haven. It grew wealthy under that regime, but over the past two decades it has competed with California for the position as the second-worst state for economic freedom. As long as it is better than New York, it will probably continue to get tax refugees from that state, but more New Yorkers now move to Florida than to New Jersey.
New Jersey’s state-level taxes are slightly higher than average (5.7 percent of income), while local taxes are much higher than average (5.5 percent). New Jerseyans have more choice of local government than any other state, with 6.2 effective competing jurisdictions per 100 square miles. Government subsidies and debt are above average, but state and local employment is a little below average. We show a small improvement in each of those three areas between 2010 and 2014.
Land-use freedom is quite limited in New Jersey. The state lets cities adopt rent control, and local zoning rules are often highly exclusionary, even though the state has been losing population for years. Renewable portfolio standards are among the highest in the country, raising electricity rates. In 2013–14, the state adopted a minimum wage. Labor-market freedom was already bad because of strict workers’ compensation rules, mandated short-term disability insurance, mandated family leave, no right-to-work law, and a stricter-than-federal anti-discrimination law. Occupational freedom is, perhaps surprisingly for such a corrupt state, close to average. However, in 2013–14, nurse practitioner freedom of independent practice was abolished. Insurance regulation is fairly strict, and there is a price-gouging law, which Governor Christie deployed after Hurricane Sandy to devastating effect. The civil liability system is somewhat better than average.
New Jersey has improved over time on personal freedom and is now better than average. Incarceration and victimless crime arrest rates, drug and nondrug, have all fallen since 2000. Asset forfeiture, however, has not been reformed much. New Jersey is a bad state for tobacco freedom, travel freedom, and gun rights, but it is a good state for gambling and same-sex marriage. The picture on educational freedom is mixed. Homeschools and private schools are barely regulated, but there are no public or private school choice programs. Cannabis freedom is similarly mixed. The state has a limited medical cannabis law, but otherwise it has done nothing to reduce penalties. Alcohol freedom is a bit above average, but the state interferes here too. Direct wine shipment is tightly regulated, and the rules on when a grocery store may sell wine are complicated—perhaps to create a “tollbooth” where state politicians can extract rents.