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What Grade Does Your Governor Get on Spending and Taxes?

10/09/2018

When Americans talk about politics, they tend to focus on what’s happens the president’s latest tweet or incendiary comment during a speech or what’s happening in Congress. Most, however, completely ignore what’s happening in their state governments, which may be more impactful to their lives that most debates that happen on the House and Senate floors.

Thankfully, there’s an avenue for inquiring minds to learn how governors are managing their state’s finances. Today, Cato Institute released its biennial fiscal report card on America’s governors.

The Cato Institute’s report, Fiscal Policy Report Card on America’s Governors 2018, examines each governor on their records on taxes and spending, assigning him or her with a letter grade. These reports have been coming out every two years since 1992. Steve Moore, who is currently a senior economic contributor for FreedomWorks, authored the first report card. Chris Edwards, the director of tax policy studies at the Cato Institute, has authored the report card since 2008.

Edwards provides the setting for this year’s report card by writing, “The U.S. economy is in its 10th year of economic expansion, and state government budgets are benefiting from a solid growth in tax revenues. State general fund revenues have grown 40 percent since 2010. Many of the nation’s governors have used the growing revenues to expand spending programs, whereas others have pursued reductions in taxes.”

The report card is the first since the passage of the Tax Cuts and Jobs Act, which prompted some states to pursue their own tax reforms. There are other recent regulatory factors that may impact revenues. Although some of these, such as the Supreme Court’s decision in Wayfair, may not be realized until next year when states begin looking at legislation that addresses online sales taxes. Still, there has been plenty of activity in state legislatures to determine whether governors, who have the power to sign or veto legislation, have acted fiscally responsible manner.

Five governors received grades of “A” on their fiscal records. Topping the list is Gov. Susana Martinez (R-N.M.). “On taxes, Martinez has pursued reforms to make New Mexico more competitive. In 2012, she signed a bill reducing gross receipts taxes on inputs to construction and manufacturing. In 2013, she pushed through a cut to the corporate income tax rate, from 7.6 to 5.9 percent, phased in over five years,” the report explains. “In 2017, she vetoed bills that would have increased taxes by $350 million a year, including increases to gas taxes, vehicle fees, freight truck charges, gross receipts taxes, and hospital taxes.”

Others who received high marks are Gov. Henry McMaster (R-S.C.), Gov. Doug Burgum (R-N.D.), Gov. Paul LePage (R-Maine), and Gov. Greg Abbott (R-Texas).

Gov. Burgum and Gov. McMaster took office in December 2016 and January 2017, respectively, so they’re off to good starts in terms of vetoing tax hikes and/or restraining spending. Gov. LePage is in the final year of his last term. Although he often makes politically incorrect remarks, there’s no question that Gov. LePage has governed as a strong fiscal conservative. Gov. Abbott has served since January 2015 has kept spending low and cut some taxes and fees.

Eight received grades of “F.” Those who received these low marks are Gov. Rory Cooper (D-N.C.), Gov. John Bel Edwards (D-La.), Tom Wolf (D-Pa.), Gov. Jim Justice (R-W.Va.), and Dennis Daugaard (R-S.D.). The worst in the nation from a fiscal perspective, however, is Gov. Jay Inslee (D-Wa.).

Gov. Inslee, at least for this two-year period, is the very definition of a tax and spend Democrat. “Inslee has pushed relentlessly for tax increases. He originally campaigned on a promise not to raise taxes, but he proposed more than $1 billion in higher taxes in his first budget in 2013,” the report notes. “In 2014, he proposed a new tax on capital gains and increases in cigarette taxes and other taxes. In 2015, he approved a gas tax increase as well as higher taxes on businesses. In 2016, he proposed broadening the bases of various taxes to raise funding for education.”

Now, the report notes that most of what Gov. Inslee, who signed a 17 percent spending increase into law, has pushed for has not made it through the Washington State Legislature, but he continues to push for higher taxes. “In his budget for the 2017–2019 biennium, Inslee proposed increasing the state’s business and occupation tax rate to raise more than $1.1 billion a year, creating a new capital gains tax of 7.9 percent to raise more than $800 million a year, and creating a carbon tax to raise more than $900 million a year,” the report adds.

There are other governors of note who may factor into the national political scene at some point in the future. Gov. John Kasich (R-Ohio) and Gov. Rick Scott (R-Fla.) each earned a “B.” Gov. John Hickenlooper received a grade of “D.”

Of course, there are 36 gubernatorial races in the 2018 election cycle and three in 2019. Several of the governors score in this year’s Cato Institute report card are term-limited, some may lose re-election, and others are retiring. Needless to say, there will be fresh faces in the 2020 report card.

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