RALEIGH – There’s another nationwide survey out that puts North Carolina in the middle of the pack – and shows a troubling deterioration.

I say “another” survey because I’ve previously written about two ratings of economic performance and competitiveness, one by the Milken Institute and the other by the Beacon Hill Institute, that offered mediocre scores to North Carolina.

The latest study was produced by researchers at Clemson University for the Pacific Research Institute and Forbes magazine. It examined the issue of economic freedom: to what degree are individuals and businesses free to pursue their economic goals and dreams without excessive government taxes and regulations? A previous analysis in 1999 ranked North Carolina 17th in the nation in economic freedom, our relatively high state tax rates being offset by better rankings on local taxes and other government-imposed costs. Unfortunately, the bad news on the freedom front has trumped the good since then, pushing our state down the list to 24th in 2004 and below such key competitors as Colorado, Virginia, Arizona, Texas, Georgia, and Florida.

On the other hand, North Carolina’s 2004 rank was comparable to some of our neighbors, such as Tennessee, and wasn’t even close to the bottom of the list, where states such as California, New York, and Illinois congregated.

One thing to keep in mind about the PRI study is its comprehensiveness. North Carolina’s income taxes are economically destructive, no doubt, but our state scored better in areas such as unemployment insurance and workers’ comp costs. Our judicial system isn’t perfect by any means, and tort reform remains a priority, but it isn’t nearly the anti-business hellhole one finds elsewhere.

Still, the relative mediocrity and declining fortunes of economic freedom in North Carolina deserve to be scrutinized carefully by political leaders who appear poised to make matters worse by raising state and local taxes yet again and contemplating new and costly rules designed to comply with air-quality mandates. The Clemson research team tested their index against measurements of economic performance and found that a state’s rating on freedom did correlate with growth in personal income. Specifically, a 10-percent improvement in a state’s economic freedom score yielded, on average, about a half-percent increase in annual income per capita.

Interestingly, the study also contributed additional support for the contention that government policymakers often overestimate the economic value of what taxes and regulations purchase. That’s the usual response whenever the size of government is criticized, but it turns out to be without much substantive foundation. Previous studies have found little correlation between educational attainment and state growth, for example, and you can add the PRI study to the list. Population factors, climate, wealth, church membership (!), and economic freedom all showed a statistically significant relationship to growth. The one variable that didn’t was educational attainment.

Rich Karlgaard, publisher of Forbes, agreed that many factors influence state economies. “Cities and regions that attract smart people will have a leg up,” he said in a foreword to the PRI report. “But cities also will need to be competitive on costs, taxes, and regulations, and not be seen as havens for frivolous litigation. Entrepreneurs risk big as it is. They must be given the chance to grow their enterprises without excessive hurdles, worries, and uncertainties.”

North Carolina can, and must, do better.

Hood is president of the John Locke Foundation and publisher of Carolina Journal.