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Kentucky Lags Behind, But Improves Ranking in Economic Freedom Report

By Erinn Broadus


Last month, the Frasier Institute released its Economic Freedom Report for 2020. The data is compiled for the year 2018 which is the latest data available and is comprised of 10 metrics across three categories: government spending, taxes, and labor regulations. When these metrics are combined, Kentucky is left with a 5.45 score, putting the Commonwealth in 39th place in the nation—an improvement from 2017 (5.24).



In the first category, government spending, Kentucky received its lowest score of 3.96 which landed it in 47th place. The only states to score below Kentucky were Alaska (2.22 points ranking 50th), New Mexico (3.88 points ranking 48th) and West Virginia (3.23 points ranking 49th ). Kentucky improved marginally in this category since 2017, scoring just 3.79 the previous year.


Government spending is comprised of three metrics: general consumption expenditures by government as a percentage of income, transfers and subsidies as a percentage of income and insurance and retirement payments as percentage of income. Kentucky received its lowest score, 2.35, on the transfers and subsidies as a percentage of income metric. This is likely due to the extraordinarily large percentage of the state population that receives government assistance and indicates a significant area for improvement.


The second metric, taxes, places Kentucky squarely in the middle of the pack—6.23 points and 25th place. This year’s score is the highest Kentucky has scored since 1985, when the state scored 6.27 points. Kentucky’s received its highest score within the taxation metric, 9.28, for low property taxes and other taxes as a percentage of income.


Lastly, Kentucky scored 6.13 and landed in 29th place in the labor market freedom metric, a significant increase from last year’s score of 5.81. This year marked the highest score for this metric to date.


As for our neighboring states, West Virginia continues to trail most of the nation, accruing 4.50 points and ranking 49th overall in economic freedom for the second year in a row. After West Virginia, Kentucky lags behind most of its peer states: Illinois ranked 34th, Indiana 8th, Ohio 35th, and Tennessee 5th.


While Kentucky did improve its rank, there is still much to be done to achieve the economic freedom that each Kentuckian deserves.


Below is an infographic detailing Kentucky's rankings:





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