Tennessee has long been one of the economically freest states, largely due to its fiscal policies, but it also used to be one of the personally freest states in the South. No longer is that true.
The Volunteer State lacks an income tax, and both state and local tax collections fall below the national average. We show state-level taxes falling from 5.0 percent of personal income in FY 2007 to a projected 4.0 percent this year. Local taxes have also fallen a bit since 2006, from about 3.5 to 3.2 percent of income. State and local debt is low, at 14.5 percent of income, and so is government employment, at 11.5 percent of income. Subsidies are about average.
Tennessee’s land-use regulations are flexible, and it has a regulatory takings law. However, eminent domain reform has not gone far. Tennessee is the number two state for labor-market freedom, with a right-to-work law, no minimum wage, relaxed workers’ comp rules, no E-Verify mandate, and federally consistent anti-discrimination law. Cable and telecommunications have been liberalized. We show a significant decline in health insurance mandates between 2008 and 2010. On the downside, the extent of occupational licensure looks rather high, though different indicators give different pictures. Nurse practitioners lost whatever independent scope of practice they had in 2009–10, but dental hygienists gained some in 2013–14. The state marginally loosened insurance rate regulation in 2009–10. There are general and gasoline-specific minimum-markup laws, as well as an anti-price-gouging law. The civil liability system improved to above average with reforms in 2011 to punitive damages.
Tennessee’s criminal justice policies have deteriorated over time. The crime-adjusted incarceration rate is still slightly below the national average but has risen since 2000. Drug arrest rates are now well above the national average. Asset forfeiture is mostly unreformed. Cannabis laws are strict. Tennessee is one of the best states for gun rights, but the rules for open carry are fairly strict. Alcohol freedom is below average because of the blue laws and very high beer taxes, which were raised in 2013–14 to $1.06 a gallon in 2008 dollars. The state has little gambling. Educational freedom is low: private school choice programs are nonexistent, and private schools and homeschools face significant regulatory burdens. Tobacco freedom is a bit better than average. As of 2014, the state had no legal recognition of same-sex partnerships but at least lacked a super-DOMA banning even private contracts.