Starting in the early 2010s, Wisconsin undertook market-oriented policy reforms that substantially enhanced economic freedom in the state as measured by two widely cited indices. This analysis uses data from border counties with Illinois and Minnesota and state-level migration data to assess the impact of Wisconsin’s “experiment in economic freedom” on the state‘s economic performance.
- Throughout most of the 20th century, Wisconsin’s policy environment was generally characterized by high taxes, strict business regulation, and labor laws that favored unionization. This was an expression of the Progressive governance model, of which Wisconsin was one of the first adopters.
- Beginning around 2011 Wisconsin broke sharply with that tradition and began an “experiment in economic freedom.” The major policy changes driving this shift included significant reductions in the state and local tax burden, the enactment of right-to-work legislation, the passage of Act 10, and the introduction of a targeted tax credit that dramatically reduced effective tax rates on income from manufacturing and agricultural activities.
- These reforms increased the state’s ranking in widely cited indices that measure economic freedom. In the early 2000s, Wisconsin consistently placed near the bottom of these rankings. During the 2010s, Wisconsin quickly climbed into the second quintile in both major indices, where it remains today.
- This paper assesses the impact of these reforms by comparing economic growth in Wisconsin’s border counties with counties on the other side of the border in Illinois and Minnesota (both of which remain near the bottom of state economic freedom rankings). This analysis supports the view that Wisconsin’s market-oriented reforms promoted growth. Further, analysis of interstate migration shows that Wisconsin has fared better in attracting and retaining working-age and higher-income taxpayers than these neighboring states since the reform era began. These results are consistent with decades of international and state-level evidence showing a strong link between increased economic freedom and prosperity.
- The gains from Wisconsin’s experiment in economic freedom are real but fragile. Recent proposals in Madison include a higher top income tax rate, rollback of the manufacturing and agriculture tax credit, repeal of Act 10, and repeal of right-to-work. Lawmakers will decide in the years ahead whether to return to the Progressive model or continue Wisconsin’s experiment in economic freedom.