Blue Collar Muse is pleased to host this guest post from Justin Owen, president and CEO of The Beacon Center of Tennessee.
A newly published book shines light on policies that will make Tennessee a freer, more prosperous place to live and do business. The book, written by a score of economists, researchers, and professors, analyzes what types of state policies lead to greater economic freedom and prosperity. The aptly named book, Freedom & Prosperity in Tennessee, reviews a litany of public policies and discerns their impact on economic growth and Tennesseans’ quality of life.
Unfortunately, many of our neighboring states are winning the race; but that just means that Tennessee leaders have plenty of room for improvement. While Tennessee is often viewed as a tax haven due to our lack of a state income tax, numerous state taxes keep prosperity at bay. One such tax, called the Hall Income Tax, is imposed on stocks and bonds, curbing investment in and driving retirees to states with more tax-friendly policies toward those who work hard and invest their earnings. Similarly, Tennessee places substantial taxes on capital investments, and property taxes are also high. For example, property taxes on industrial property are four times higher in Tennessee than they are in Delaware, often viewed as the most free market state in the nation.
Regulations also inhibit economic growth. Tennessee is rife with occupational licensing schemes, forcing Tennesseans in more than 100 different occupations to obtain government permission—and pay a hefty fee—before practicing their trade. The average workers seeking to enter one of these licensed occupations will pay an average of $218 and spend 222 days (that’s seven and a half months) in training.
This puts up a barrier to entry for thousands of workers to enter the occupation of their choice. And guess what? These restrictions are lobbied for by none other than those in the occupation itself as a means to shelter themselves from competition, while affording them the opportunity to drive up their prices. This particularly harms low-income and less skilled workers who are literally shut out of many jobs of their choice. It also hurts consumers, who have to pay higher prices for goods and services as a result.
Corporate welfare is also alive and well in Tennessee as repeatedly documented in the book. Those of us not fortunate enough to receive a tax break or handout from government must pay higher taxes or forego other government services when politicians dole out favoritism to a select few companies. As Freedom & Prosperity in Tennessee explains, there is a big difference between “pro-business” and “free market,” and the latter is losing the fight. Curbing corporate welfare would level the playing field for all businesses and allow government to reduce taxes on everyone.
Another topic covered widely in the book is that of property rights. The use—and abuse—of eminent domain is on the rise in our state. The practice, which allows government to seize private property for a “public use,” was once limited to roads, schools, and similar public endeavors. Now, however, local governments can take property and literally turn it over to a private developer just because he has a better idea of what to do with the land. Got a small, three-bedroom house? The developer down the street could put 50 condos on your land, and the government can help him take your property to make it happen whether you like it or not. As a result of the threat of confiscation, many property owners refuse to make improvements to their property, hampering economic growth along the way.
Education reform is also shown to have an impact on economic gains and prosperity. Despite countless dollars spent on education, student achievement continues to wane in Tennessee. The book notes how simply allowing parents to choose their children’s school has shown to make a meaningful difference, leading to greater prosperity in not only their lives, but those of all citizens. For decades, Tennesseans have agreed that a good education is one of the key factors by which they measure their quality of life, so it’s time we give them a greater say in where their children get that education.
All of these state policies have a direct correlation to our prosperity, which does indeed cease at the border. For example, border county citizens in Virginia earn $2,361 more each year than Tennesseans; in Alabama, it’s $5,747 more. Considering the similarities in demographics and geography, these higher wages reflect better functioning public policy in Tennessee’s neighboring states.
The good news is that it’s not all doom and gloom for Tennessee’s economic future. Our state leaders have done some great things to improve our way of life, from enacting right-to-work laws that protect workers from forced unionization to tort reform that curbs abusive lawsuits, as well as lowering and eliminating certain taxes, including the recent repeal of the death tax. But as Freedom & Prosperity in Tennessee proves, there is much work to be done to make our state competitive and our residents freer and more prosperous.
Justin Owen is the president & CEO of the Beacon Center of Tennessee, the state’s free market think tank. He is a co-author of Freedom & Prosperity in Tennessee. To order a copy of the book, visit www.BeaconTN.org.