Governors Fiscal Report 2018

By CHRIS EDWARDS, Cato Institute, October 18, 2018 

The Cato Institute has released its 14th biennial fiscal report card on the governors.

The report uses statistical data to grade the governors on their taxing and spending records since 2016. Governors who have cut taxes and spending the most receive the highest grades, whereas those who have increased taxes and spending the most receive the lowest grades.

Five governors were awarded an A: Susana Martinez of New Mexico, Henry McMaster of South Carolina, Doug Burgum of North Dakota, Paul LePage of Maine, and Greg Abbott of Texas.

Eight governors were awarded an F: Roy Cooper of North Carolina, John Bel Edwards of Louisiana, Tom Wolf of Pennsylvania, Jim Justice of West Virginia, Dennis Daugaard of South Dakota, David Ige of Hawaii, Kate Brown of Oregon, and Jay Inslee of Washington.

Susana Martinez received the highest score this year. She is in her eighth year in office and scored quite well on previous Cato reports. One achievement has been vetoing all tax hikes that have come to her desk. Last year, she vetoed $350 million in tax hikes.

Many Republican governors have entered office promising not to raise taxes but then capitulate to the spending lobbies. Brian Sandoval of Nevada and Charlie Baker of Massachusetts are good examples. Both governors made epic U-turns in approving major new taxes after being elected on no-tax-hike pledges.

So bravo to Governor Martinez for standing firm against tax increases and for restraining New Mexico’s budget during her two terms in office.

In addition to examining the tax and spending actions of each governor, the Cato report looks at recent changes in the state fiscal environment.

The Tax Cuts and Jobs Act of 2017 has shaken up state tax policy. The act changed the federal income tax base, which in turn changed state tax bases. The act also capped the federal tax deduction for state and local taxes. That reform increased the bite of state and local taxes for millions of households and may prompt higher out-migration from high-tax states.

Recent Supreme Court decisions regarding online sales taxes and public-sector labor unions have also affected the state fiscal environment. Lastly, the legalization of recreational marijuana has created a new source of revenue for some states.

The Fiscal Policy Report Card on America’s Governors 2018 is here.

Prior report cards are here.

  *   *   *   *   *

Hawaii -- David Ige (D)

Legislature: Democratic

Took office: December 2014

Before being elected governor of Hawaii, David Ige was a state legislator and a manager in the telecommunications industry. He defeated the previous governor, Neil Abercrombie, in the 2014 Democratic primary. Ige pointed to Abercrombie’s tax increases as one cause of his defeat, but Ige is repeating his predecessor’s misguided high-tax approach.

In 2016, Ige proposed increases in gasoline taxes and vehicle registration fees. In 2017, he approved a bill to create a state earned-income tax credit but offset the cost by reinstating higher income tax rates on high earners that had expired in 2015. The state’s top income tax rate jumped from 8.25 percent to 11.0 percent, raising about $50 million a year.85

Ige also approved a bill to raise the state’s hotel room tax and extend a surcharge of the general excise tax, which is similar to a sales tax. These tax hikes, which are expected to raise about $2.4 billion over 13 years, will fund a boondoggle rail transit project that is suffering a large cost overrun.86

Overall score -- 35

• Grade-F (3-way tie for 3rd-worst)
• Spending score - 25
• Proposed changes in per capita spending - 5.1%
• Actual changes in per capita spending – 3.7 %

Revenue score -- 46

• Changes in revenues from proposed and enacted tax changes – 1.0%

Tax rate score --34

• Change in top individual income tax rate – 2.75%
• Change in top corporate income tax rate - 0
• Change in general sales tax  rate - 0
• Change in cigarette tax rate (cents per pack) - 0