FILE - Downtown Houston Texas flag

The U.S. flag and Texas state flag fly in downtown Houston.

Historically, economic freedom had been declining in all three North American countries until recently. But Texas ranks fifth-best for economic freedom, according to a new analysis published by the Economic Research Center at The Buckeye Institute in partnership with Canada's Fraser Institute.

Its report, Economic Freedom of North America, identified New Hampshire as the most economically free state, followed by Florida, Tennessee, Virginia and Texas.

The report ranked every state and province in North America based on economic freedom, as measured by government spending, taxation, and labor market restrictions. The current rankings are based on data from 2017.

“Economically free states encourage and allow families and businesses to pursue economic prosperity,” the Buckeye Institute said in a statement accompanying the report’s findings. “Although governments can never ensure economic success for every citizen, policymakers can take meaningful steps to make success more likely.”

“Policymakers should seize the chance to prioritize workers by lowering their tax burdens and level the private sector playing field with smart regulatory reforms that promote job creation and business investment,” the institute adds.

In the area of government spending, Texas ranked 14th for its consumption spending as a percentage of personal income; seventh for transfers and subsidies as a percentage of personal income; and 12th for insurance and retirement payment as a percentage of personal income.

In the area of taxes, Texas ranked first for income and payroll tax revenue as a percentage of personal income and first for its top income tax rate. (Texas doesn't assess a personal income tax.) It ranked 36th for its higher property taxes and other tax revenue as a percentage of personal income and 42nd for sales tax revenue as a percentage of personal income.

In the area of labor market freedom, Texas ranked 13th for minimum wage income as a percentage of per capita personal income, 19th for government employees as a percentage of total employees in the state, and 18th for union density as a percentage of total employees in the state.

“As the size of government expands, less room is available for private choice,” the report states. “When the government taxes one person in order to give money to another, it separates individuals from the full benefits of their labor and reduces the real returns of such activity.”

“When government owns what would otherwise be private enterprises and engages in more of what would otherwise be private investment, economic freedom is reduced,” the report adds.

The Fraser Institute has measured economic freedom in every state and province in the United States, Canada, and Mexico for 15 years, “creating a comprehensive assessment of trends in economic freedom.” The Buckeye Institute’s Economic Research Center has co-published the economic freedom index report for five years in a row.