Fiscal Policy Report Card on America’s Governors 2024

from CATO Institute, Oct 15, 2024

This report grades governors on their fiscal policies from a limited‐​government perspective. Governors receiving an A are those who have cut taxes and spending the most, whereas governors receiving an F have increased taxes and spending the most….

INTRODUCTION

Governors play a key role in state fiscal policy. They propose budgets, recommend tax changes, and sign or veto tax and spending bills. When the economy is growing, governors can use rising revenues to expand programs or they can return extra revenues to the public through tax cuts. When the economy slows and budgets go into deficit, governors can respond by raising taxes or trimming spending.

This report grades governors on their fiscal policies from a limited-government perspective. Governors receiving an A are those who have cut taxes and spending the most, whereas governors receiving an F have increased taxes and spending the most. The grading mechanism is based on seven variables: two spending variables, one revenue variable, and four tax-rate variables. Cato’s state fiscal report has used the same methodology since 2008.

The results are data driven. They account for tax and spending actions that affect short-term budgets in the states. However, they do not account for longer-term or structural changes that governors may make, such as reforms to state pension plans. Thus, the results provide one measure of how fiscally conservative each governor is, but they do not reflect all the fiscal actions that governors take.

Tax and spending data for the report come from the National Association of State Budget Officers (NASBO), the National Conference of State Legislatures, the Tax Foundation, the budget agencies of each state, and news articles. The data cover the period from January 2022 to August 2024.¹ The report rates 48 governors. It excludes the governor of Louisiana because he has been in office only a brief time, and the governor of Alaska because of peculiarities in that state’s budget.

The next section discusses the highest-scoring governors. Subsequent sections examine trends in revenues and tax policy, business subsidies, school choice reforms, and state debt levels. Appendix A discusses the methodology used to grade the governors. Appendix B provides summaries of the fiscal records of the 48 governors included in the report….

Hawaii

Josh Green grew up in Pittsburgh, became a doctor, and moved to Hawaii to practice medicine. Green served in the state legislature for more than a decade and served as lieutenant governor.

In 2023, Green approved tax increases on cigarette dealers, e‑cigarettes, and e‑liquids. He also signed legislation increasing low-income tax credits. In February 2024, Green proposed increasing cigarette taxes from $3.20 to $3.60 per pack, raising the conveyance tax on sales of luxury homes, and imposing a new tax on hotels and vacation rentals.⁷⁶

However, Green also proposed cutting income taxes by raising tax bracket thresholds and indexing brackets for inflation. In his 2024 state of the state address he said, “We will also index the state’s tax code to provide all taxpayers relief from inflation—a long overdue change which will help people in every tax bracket.”⁷⁷

The legislature followed through with HB 2404, which included even larger income tax cuts than Green had proposed. The governor signed the bill, which doubled standard deductions and will cut taxes in future years by adjusting income tax brackets. If the reductions proceed as planned, the average effective tax rates on middle-income earners will be cut roughly in half by 2031, with larger cuts at the bottom and smaller cuts at the top.⁷⁸

This was a large tax cut, particularly in a state that rarely cuts taxes. However, the law did not reduce Hawaii’s high top tax rate of 11 percent. Nonetheless, taxpayers will save more than $3 billion over the first five years, which is one of the largest state tax cuts relative to total tax revenues among the states in recent years.⁷⁹

Green has held the general fund budget quite flat and has been willing to trim excess spending passed by the legislature.⁸⁰ For these reasons, Green is the highest-scoring Democrat in this study.

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CS: Walz’ Minnesota ranked last for fiscal policy out of all 50 states