Pro-liberty Republican governors are slashing high taxes and rolling back big government — and that’s good for taxpayers

Cato Institute Report Card 2014

The Cato Institute released its 2014 biennial report card on America’s governors late last week, and it trumpeted good news for taxpayers in North Carolina, Kansas, Maine, and Indiana. Republican governors in these four states received the ‘A’ rating (states are rated A-F) because they have enacted — since 2012 — pro-growth policies that have reduced the burden on taxpayers and gotten government out of the way for economic development.

Cato highlights its methodology in its executive summary:

[The Fiscal Policy Report Card on America’s Governors] uses statistical data to grade the governors on their taxing and spending records—governors who have cut taxes and spending the most receive the highest grades, while those who have increased taxes and spending the most receive the lowest grades.

Since states are the “laboratories of democracy,” policies enacted from state to state can have wide-ranging effects. Crossing one state’s boundaries into another state can yield dramatically different results. For example, Illinois received an ‘F’ while its neighbor to the east (Indiana) received an ‘A’.

Cato describes the two states tied for first place — North Carolina and Kansas, with an overall numerical rating of 78:

Pat McCrory of North Carolina signed into law a major tax reform package in 2013, which replaced three individual income tax rates (6.0, 7.0, and 7.75 percent) with a single rate of 5.8 percent, falling to 5.75 percent in 2015. The package also cut the corporate tax rate, repealed the estate tax, and broadened the sales tax base. These reforms have substantially improved North Carolina’s tax competitiveness.2 Governor McCrory approved further tax cuts in 2014 and he has kept a tight rein on spending.

Sam Brownback of Kansas has spearheaded major tax reforms. In 2012 he signed into law a package that reduced the number of individual income tax brackets from three to two and cut the top tax rate from 6.45 to 4.9 percent. The reform also increased the standard deduction, reduced taxes on small businesses, and repealed numerous narrow tax breaks. Brownback approved additional changes in 2013, including further income tax rate cuts, broadening the income tax base, and increasing the sales tax rate. The governor has also been a frugal budgeter since 2012, overseeing just small increases in general fund spending.

Brownback is the only one of these two up for re-election this year, and as United Liberty reported last week, national left-leaning groups are focusing an intense amount of resources against him, due mostly to the fact that he’s pushed reforms for which the Cato Institute has praised him.

The full report, which can be read here, tracks spending and revenue changes as well as enacted tax rate changes. Cato’s report also provides state-by-state policy notes for each state, and the notes on Kansas debunk many of the criticisms leveled by liberals who are funneling money into the state to defeat Brownback (emphasis mine):

Some pundits are suggesting that the Kansas tax cuts are a failure because they have created large gaps in future state budgets. But the Kansas legislature released budget projections in May showing that even with current tax cuts in place, general fund revenue is projected to rise from $5.67 billion this year to $6.52 billion in 2019. That works out to an annual average growth rate of 2.8 percent, although updated estimates are expected to show somewhat lower revenues. Some Kansas legislators may view slower revenue growth as a terrible problem, but it creates an opportunity for them to improve government efficiency and cut unneeded programs.

Not surprisingly, every ‘F’ rating was awarded to Democrat governors (eight total) in states like California, Illinois, Massachusetts, and Washington, which are well-known for their big government policies and hostile high-tax climate. Luckily for taxpayers in those states, every one of them (except Delaware) borders a state with an ‘A’ or ‘B’ rating.

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