Attracting business requires more than low taxes

Published 10:32 pm Thursday, September 27, 2012

I give about a dozen presentations per year to local and regional groups on the state of the US economy. Without fail, the groups also ask me to weigh in on the state of Alabama’s economy. Depending on the current policies under consideration in Montgomery, my comments can vary a bit: At one event, might be emphasizing the costs to taxpayers of Alabama’s broken pension system; at another I might be focused more on cutting the number of Alabama’s duplicative government jobs.

One thing I always mention, though, is the need for Alabama to grant people more personal freedom, and my case for personal freedom goes something like the following: “Alabama needs to do a better job of attracting businesses. Attracting businesses requires a commitment to economic freedom. The case for more economic freedom is unambiguous: businesses are drawn to states with low, predictable taxes and sensible regulation.

Businesses are also drawn to states where executives and employees enjoy plenty of personal freedom. By personal freedom I mean things like the freedom to own a gun without excessive paperwork and permission, the freedom to be a foreigner in our state without being worried about being arrested, and the freedom to buy a beer on Sunday. When it comes to personal freedom, Alabama could be doing a lot better.”

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My call for Alabama’s lawmakers to give people more personal freedom are not driven by my own personal tastes and desires to be able to buy a beer on Sunday (which, by the way, are strong desires). Nor, are they based on a hunch about the amount of personal freedom Alabamians enjoy.

In an outstanding report titled Freedom in the 50 States, Alabama’s ranking for personal freedom turns out to be 38th out of 50 states. According to the authors of the study, Jason Sorens and Will Ruger, “Alabama does much better on economic than personal freedom, as one might expect from a highly socially conservative state. Nevertheless, Alabama does well on some personal freedoms, such as smoking bans, cigarette taxes, and gun control. Alabama has a strangely restrictive alcohol regime, with the second-highest beer taxes and highest spirits taxes in the country. In addition, Alabama’s marijuana laws are unusually punitive: A three-year mandatory minimum sentence exists for all marijuana cultivation or sale convictions, by far the highest in the country, and the maximum sentence for a single cultivation or sale conviction is life in prison. Furthermore, Alabama’s court system is one of the worst in the country.”

While our low score reflects the strong social conservatism of our state, the restrictions we are placing on people’s personal freedoms are costing us economic growth and jobs. Businesses and their productive, creative employees will think twice about investing in a state where there is not much to do and little tolerance for alternative lifestyles. Our excessive taxes on alcohol are a significant barrier to free exchange (and they are, in all likelihood, beyond the point of tax revenue maximization). Our stiff penalties towards marijuana, a substance which 56 percent of Americans think should be legal, signal intolerance towards experimentation.

Our state’s hostility towards freedom comes at a significant economic cost. And, if hits to our income and job creation weren’t enough reason to embrace more freedom, there’s a more fundamental reason to let Alabamians be free: Freedom is a crucial component in living a good life. When people have the freedom to live as they want to live, so long as they are not causing harm to others, the maximum amount of diversity in society is realized. Maximum freedom to experiment gives each person the opportunity to find his or her way to a satisfying, fulfilling life, and it allows for learning. It’s the kind of society most us, deep down, believe we live and know we want to live in. But, it’s a society that’s a long ways from being realized here in Alabama today, and we, therefore, have a lot of work to do to get better.


*Scott Beaulier is Executive Director of the Manuel H. Johnson Center for Political Economy at Troy University.