New Hampshire
New Hampshire exhibits regulatory arbitrage: no income or sales tax creates a tax haven for Boston workers, funding state through property taxes on wealthy commuters.
New Hampshire exploits regulatory arbitrage within New England. The state has no income tax and no sales tax, financing government through property taxes and fees. This attracts residents who work in Massachusetts but live in New Hampshire, capturing Boston's wages without paying Boston's taxes. The arrangement makes New Hampshire's economy partially parasitic on its southern neighbor's labor market.
The state's "Live Free or Die" ethos creates a libertarian culture that attracts both businesses seeking minimal regulation and individuals seeking personal freedom. Technology companies have established satellite offices, while financial services firms appreciate the tax environment. The result is unusually high per capita income for a state without major corporate headquarters or obvious economic specialization.
Tourism provides seasonal employment: White Mountains skiing in winter, leaf-peeping and lake recreation in summer. Manufacturing persists in specialized niches. But New Hampshire's small size (1.4 million people) limits diversification. The state functions best as a tax haven adjacent to Massachusetts, a specialized niche that depends entirely on maintaining the tax differential that defines its competitive advantage.