Alberta is the highest-ranking Canadian province in terms of economic freedom, and the rest aren’t even even close.
A recent study released by the Fraser Institute found that Alberta ranked 12th for economic freedom among Canada’s ten provinces, America’s 50 states, Mexico’s 32 states, and the US territory of Puerto Rico. Alberta tied with Texas, Tennessee, Colorado, and South Dakota.
The next freest province was British Columbia, ranking 43, tied with Minnesota, Massachusetts, and New Mexico. Although it ranked moderately high on the freedom scale, it was more than three and a half times less economically free than Alberta.
“People are said to have more economic freedom when they are allowed to make more of their own economic choices,” Matthew Mitchell, a senior fellow at the Fraser Institute and the study’s co-author, told True North in an interview.
“You can think about these choices as a subset of having free will about your economic decisions,” he said. “You can start and run a business, charge prices that you want, hire people that you want, acquire and use property, form contracts, that sort of thing.”
Using 2022 data, the study measured 10 indicators to measure the impact of provincial state and federal policies on economic freedom in each analyzed state and province.
The study considers government spending, taxes, labour markets, legal systems and property rights, “sound money,” and the freedom to trade internationally.
It also considers federal credit market regulation and business regulations in general, as well as federal top marginal income and payroll tax rates when determining how much economic freedom a region has.
“Reducing the burden of government in both in terms of taxes and regulation is probably the number one thing that provinces can do (to become freer), making it so that it’s easier to start and run a business with lower marginal tax rates and lower regulatory burdens,” Mitchell said.
He noted that the study doesn’t measure things like quality of life as various data and studies have shown a direct correlation between regions with economic freedom and higher income, faster economic growth, and less poverty.
He said people and businesses are more likely to move to areas with high economic freedom, which is a testament to the value people place in economic freedom.
All Canadian provinces performed well in maintaining property rights by protecting persons, property, and contracts.
“If you do international comparisons, that’s one of the reasons Canada is a prosperous country,” Mitchell said. “It’s got that aspect of economic freedom that does very, very well.”
He said that Alberta’s government spending level sets it apart from the rest. In Alberta, government consumption spending as a share of provincial income was 26.8% in 2022. In contrast, the average among the other provinces was 30.9% of their income, with Nova Scotia’s government spending 34.2% of its provincial income.
“Because the government of Alberta spends less, its citizens are allowed to keep more of their money and make more of their own economic choices,” he said.
Ontario was the next highest province, ranking 47th and beating out California, Rhode Island, and Alaska. Quebec came in 54th place, ahead of only New York and Deleware.
Canada’s Atlantic provinces were the least free economically, scoring below every US State and beating only the US territory of Puerto Rico.
He said that one of the major factors dragging these provinces down in the rankings was their high taxes.
“Alberta’s top marginal tax rate is 15%, and it kicks in at a relatively high threshold of $267,724,” Mitchell said. “By contrast, it is 21% in Nova Scotia, and it kicks in at $124,650. PEI’s rate isn’t that high at 18.37%, but it kicks in at just $53,158.”
According to the study, when a province imposes high tax rates at a low-income level, it reduces people’s ability to make their own economic choices, as they have fewer resources.
