Cronyism

Cato Institute Grades Governors on their Fiscal Record

cato governor's fiscal report card ranking states

When it comes to making their state’s economy more competitive, governors have a wide variety of policy options available. But which governors have the best track record on economic growth? The Cato Institute’s Fiscal Policy Report Card on America’s Governors analyzes each governor’s fiscal policies from January 2012 to August 2014. Governors who keep tax rates competitive and maintain reasonable levels of spending received an “A,” while governors who increased taxes and spending received an “F.”

In this report, four governors earned an “A” for pro-growth policies: Governor Pat McCrory of North Carolina, Governor Sam Brownback of Kansas, Governor Paul LePage of Maine, and Governor Mike Pence of Indiana.

North Carolina’s income tax reform is considered one of the most significant tax reforms in the past decade. For more on the specifics on North Carolina’s groundbreaking reforms, see here. As a result, North Carolina’s economic outlook ranking jumped from 22nd to 6th in the 2014 edition of Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index.

Income tax reform in Kansas has helped the state to be more competitive. The report also highlights Governor LePage’s proposal to match $100 million in new tax cuts with $100 million in spending cuts. Finally, Indiana’s death tax repeal as well as rate reductions to the personal income tax, corporate income tax and business property tax has created a strong pro-growth environment. Consequently, Indiana’s pro-growth reforms led to the state ranking 3rd in economic outlook in Rich States, Poor States.

On the other end of the spectrum, many governors received a poor grade for their tax and spend policies. Eight governors received an “F”: Governor Mark Dayton of Minnesota, Governor John Kitzhaber of Oregon, Governor Jack Markell of Delaware, Governor Jay Inslee of Washington, Governor Pat Quinn of Illinois, Governor Deval Patrick of Massachusetts, Governor John Hickenlooper of Colorado and Governor Jerry Brown of California. Governor Brown received the worst grade for supporting large tax increases. Currently, California’s 13.3 percent personal income tax rate is the highest top marginal rate in the nation.

As governors consider the best policies for future reform, the Fiscal Policy Report Card on America’s Governors highlights tax cronyism (showing favor to a specific firm or industry at the expense of others) as a barrier to economic growth. The Cato Institute cites the recent ALEC report, The Unseen Costs of Tax Cronyism: Favoritism and Forgone Growth, to demonstrate that all businesses should be provided with a level playing field to compete for jobs and investments. Cato’s Fiscal Policy Report Card on America’s Governors demonstrates that competitive tax rates, reasonable spending, and thoughtful regulations create an environment full of economic opportunities.

 


In Depth: Cronyism

Cronyism in tax policy stifles innovation, hinders competition and introduces a deep temptation for corruption. The 2014 ALEC Center for State Fiscal Reform study, The Unseen Costs of Tax Cronyism: Favoritism and Foregone Growth, found that in the most recent year in which states published their respective tax expenditure …

+ Cronyism In Depth