Delaware among least ‘free’ states, study says

WASHINGTON — Delaware is among the least “free” states in the country says a recent study published by the Cato Institute, a libertarian think-tank.

The 2018 edition of Freedom in the 50 States — authored by William Ruger and Jason Sorens — ranked Delaware in 43rd place. Florida took the top spot, and New York came in last.

Examining over 230 policy variables, the study claims Delaware has lost a lot of ground since in the last two decades in fiscal, regulatory and personal freedoms.

“Delaware is an interesting state because it scored pretty high in our index in the early 2000s but has been falling since,” said Mr. Sorens. “In part, what’s going on is that a lot of other states have reformed or liberalized regulations while Delaware has not. Also, many states have responded to the great recession by cutting government spending or trying to keep it low or retire state debt as a fiscal strategy, resisting the temptation of using the growing economy to increase spending.”

The governor’s office didn’t reply to a request for comment on the report’s findings.

Fiscal freedom

Although well known as being one of the five states that don’t have a sales tax, the state still ranks poorly in tax burden metrics.

“Delaware’s tax burden is nearly 10 percent of personal income, which is worse than the average state,” said Mr. Sorens. “While it doesn’t have a sales tax, we’re looking at the overall tax burden and the state makes up for that with other taxes it imposes.”

Additionally, the study notes that residents have little freedom in terms of choosing their tax burden by where they decide to live in the state.

“The state is highly fiscally centralized with most of the tax burden at the state level,” reads the report. “With 1.6 competing jurisdictions per 100 square miles, Delawareans would stand to benefit were the state to allow more tax space for local governments.”

Regulatory freedom

The report claims that Delaware’s regulatory atmosphere is also below average, specifically as it pertains to supporting a “free” business environment.

“Labor law is fairly anti-employment, with a minimum wage and no right-to-work,” reads the report. “Occupational freedom is mediocre, with dental hygienists and nurse practitioners unable to practice independently. The state has certificate-of-need laws for hospitals. Land-use regulation ratcheted up significantly in the 2000–2010 period, as have renewable portfolio standards for utilities. The state’s insurance commissioner treats property and casualty insurance rates under ‘prior approval’ contrary to statute, according to the Insurance Information Institute. The state remains one of a handful that have not joined the Interstate Insurance Product Regulation Compact. Even the state’s vaunted liability system has actually deteriorated since 2000 to merely average, we find. The state has enacted no tort reforms, and the size of the legal sector has grown, whether measured in number of lawyers or share of Gross Domestic Product.”

Mr. Sorens says the state’s existing insurance regulations constrict choice and drive up consumers’ costs.

“Regulating insurance rates as strictly as Delaware does can make it difficult for some buyers to find private market insurance,” he said. “What would be better would be to allow more rate setting freedom in insurance. That’d give private buyers of insurance — such as drivers and homeowners — more incentives to lower their risks if they were paying full cost of them. Also, the IIPRC makes it easy for companies to sell life insurance and annuities across state lines. When a state isn’t a member, providers have to go through each state’s insurance regulation process and that drives up costs and ultimately reduces the number of choices consumers have of new insurance products.”

Though the state has a reputation for having a corporation-friendly legal environment, Mr. Sorens says the advantages are “overstated.”

“Delaware has always scored well for its civil liabilities system, but we feel that it’s overstated because the state hasn’t enacted any type of tort reforms so there is some risk that you could get class-action lawsuits that result in very large payouts or punitive damages,” he said. “Some states have gone as far as outlawing punitive damages and others have capped it. Overall, businesses seem to still like Delaware’s legal climate.”

Speculating, Mr. Sorens says the state’s lack of “anti-takeover statutes” likely contribute to its corporate attractiveness.

“Those statutes are a negative for freedom because they benefit corporate management at the expense of investors by making it difficult for them to launch a, so-called ‘hostile takeover’ of a company,” he said. “Delaware is one of the few states that don’t have that and that’s probably one of the reasons businesses like to incorporate in Delaware. We don’t code for that in our study, but we likely will in the next edition, which ought to help the state’s ranking a bit.”

Personal freedom

The researchers note that Delaware seems unique in that its level of personal freedoms hasn’t tracked with its political persuasion.

“We expect as a state gets more democratic over time, as Delaware has, that there would be benefits in personal freedom, but that really hasn’t been the case,” said Mr. Sorens. “Some red states benefited in our rankings when the supreme court had struck down bans on same sex marriage, so they appear freer than they would be if they’d had their own way. But, in Delaware’s case, things like no ‘shall-issue’ permits for concealed carry, no private school choice programs and a recent increase in cigarette taxes have hurt. On the positive side, marijuana was decriminalized, a medical marijuana law was passed and gambling laws are permissive.”

Perhaps what hurts the state’s ranking most in personal freedoms are the policies related to criminal justice, says Mr. Sorens.

“Deep blue states, Massachusetts for example, incarcerate much fewer people than redder states, but again that’s not the case in Delaware,” he said. “Its incarceration rate is around the national average even when controlling for the crime rate. Delaware also has very lax laws regarding civil asset forfeiture — in other words, it’s very easy for law enforcement to seize property from citizens even if they have never been convicted or even charged with a crime.”

Arguing that Delaware’s civil asset forfeiture laws are among the worst in the nation, Mr. Sorens claims the policies even create an incentive for police to seize property.

“To show that property is subject to forfeiture, prosecutors in Delaware only have to meet the minimal burden of proof: probable cause,” he said. “If you contest the forfeiture as the property owner, the burden of proof is on you. You basically have to prove that you’re innocent of a crime in order to have the property returned to you. On top of that, all of the proceeds of asset forfeiture go to law enforcement, so there is a clear incentive for policing for profit. Law enforcement can seize and forfeit property to be used for their own budgets.”

The American Civil Liberties Union of Delaware agrees with the report’s conclusions regarding criminal justice policies.

“We’re very concerned about the incarceration rate here in Delaware,” said ACLU-DE director Kathleen MacRae. “According to the Prison Policy Initiative, we have the 14th highest incarceration rate in the country. We’re the highest in the region, but I can’t imagine that the crime rate is much different in New York or New Jersey. Upwards of 20 percent of the people incarcerated in Delaware have not been convicted of a crime, they’re in there because they cant make bail. Our recidivism rate is very high as well, so it really creates a vicious cycle when crime rate, incarceration rate and recidivism all act together.”

Ms. MacRae also claims the ACLU-DE frequently comes into contact with people victimized by the current civil asset forfeiture laws.

“It definitely happens here — we just became aware of a case in Southern Delaware where a man was stopped by the police for a traffic violation and had $600 in cash seized from him,” said Ms. MacRae. “He was given a ticket for the traffic violation but then the police officer brought out a drug dog to sniff around the car. The man had his $600 on him because he was going to pay his rent, but the dog alerted on the money. It’s well known that almost all money in circulation has drug residue on it. Still, the officer confiscated the $600. To get your property back, your best bet is to hire a lawyer because the process is long and involved, but it might not make sense economically. Are you going to pay a lawyer $500 to $1000 to get your $600 back?”

Policy recommendations

To climb the rankings, the Cato Institute offers the following recommendations in their report:

•Fiscal freedom: Reduce state-level taxes and education spending. Delaware is one of the freest-spending states in the country on education. Allow local governments to pick up more of the school spending out of their own fiscal resources.

•Regulatory freedom: Liberalize insurance laws by moving to a “use and file” system for property and casualty rates and life insurance forms, and join the IIPRC.

•Personal freedom: Eliminate or significantly limit civil asset forfeiture, consistent with reform trends across the country aimed at protecting the individual property rights of innocent people prior to conviction.

To view the full report, visit freedominthe50states.org.

Reach staff writer Ian Gronau at igronau@newszap.com

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