Schweitzer Engineering Laboratories (SEL) recently released its 2025 Freedom Index Rankings for states. SEL is a global leader in power system protection, automation and control solutions. The SEL report ranks the most economically and politically free states in the nation. It utilizes data from the American Legislative Exchange Council (ALEC), the Cato Institute, and various government agencies to identify the optimal business and trade environments nationwide.
SEL found that Wyoming, Idaho, and Montana are attractive states, but Washington continues to trend in the wrong direction for economic freedom. SEL considers three pillars for its rankings: government efficiency, regulatory freedom, and energy resiliency. The top five states according to SEL are South Dakota, Wyoming, Utah, Idaho, and North Dakota. The poorest performing states are Vermont, New York, Hawaii, California, and Maine.
Wyoming was ranked number two for the second year in a row. The Cowboy State’s success can partially be attributed to its lack of an income tax. Wyoming also has a very low regulatory burden and continues to evaluate how it can promote a business-friendly tax and legal system. In addition to no state income tax, the Wyoming Legislature passed property tax relief for homeowners during the most recent legislative session.
Idaho continued to rank in the top five nationally, coming in at number four. This year, Idaho lowered its corporate and individual tax rate from 5.695% to 5.3%, making it the largest tax cut in Idaho’s history. SEL noted that issues to keep an eye on include “housing affordability, and water resource sustainability” to accommodate future growth.
Montana secured the 10th place ranking from SEL. Along with Idaho, the Treasure State enacted major tax relief this year. The various income tax changes adopted are expected to save taxpayers more than $750 million over the next four years. Montana was also ranked as the best state for business startups this year. It is home to the highest percentage of business startups per 100,000, and the highest rate of survival from 10-year-old startups. In 2021, Montana created the Red Tape Relief Task Force, and it has successfully amended or repealed 25% of its state regulations. Montana will likely move up in future SEL rankings if it continues this progress.
Washington state was once again reminded that its regulatory and business climate is very deficient. The Evergreen State was unable to improve its poor ranking of 35th in the nation for the second year in a row. This ranking could’ve been worse, but other states such as California and Connecticut drove their states even farther in the wrong direction. As states like Wyoming, Idaho, and Montana look to assess the best way to lower the tax and regulatory burden on their business environment, Washington did the exact opposite.
Washington legislators this year decided to substantially increase taxes on businesses and individuals, resulting in one of the largest tax increases in state history. This includes a business and occupation tax rate increase, expansion of the sales tax, increases in the death (estate) and capital gains income tax, elimination of certain tax preferences, and additional taxes on luxury items and electric vehicle credits. SEL warns on Washington: “The current climate is increasingly unfavorable, particularly for small businesses, manufacturers, and technology firms. These measures have all intensified an already burdensome regulatory environment, and the state’s score and overall competitiveness will likely decline in future years as a result.”
The SEL report reveals the stark differences between the tax and regulatory priorities in the Mountain States. Wyoming, Idaho, and Montana continue to work to lower taxes while spending revenue efficiently. Washington instead continues to invent new ways to tax its residents and businesses without addressing its overspending problem.
As demonstrated by the SEL Freedom Index, Idaho, Montana and Wyoming are making their business environments more politically and economically free, while Washington is heading in the opposite direction.
Sam Cardwell is a Policy Analyst for the Mountain States Policy Center, an independent research organization based in Idaho, Montana, Eastern Washington and Wyoming. Online at mountainstatespolicy.org.
