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Fiscal Policy Richard Falknor on 16 Oct 2012 05:34 pm

Cato Rates Governors: O’Malley Gets “D”(42), McDonnell “C”(50)

The Cato Institute’s very useful “Fiscal Policy Report Card on America’s Governors 2012” (click here) is a credit to their tax-policy-chief Chris Edwards and his staff.

Writes author Edwards —

“The recovery from the recent recession has been very sluggish, and the nation’s governors have struggled with the resulting budget deficits, unemployment, and other economic problems in their states. Many reform-minded governors elected in 2010 have championed tax reforms and spending restraint to get their states back on track. Other governors have expanded government with old-fashioned tax-and-spend policies.

That is the backdrop to this year’s 11th biennial fiscal report card on the governors, which examines state budget actions since 2010. It 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.

Four governors were awarded an “A” in this report card—Sam Brownback of Kansas, Rick Scott of Florida, Paul LePage of Maine, and Tom Corbett of Pennsylvania. Five governors were awarded an “F”—Pat Quinn of Illinois, Dan Malloy of Connecticut, Mark Dayton of Minnesota, Neil Abercrombie of Hawaii, and Chris Gregoire of Washington.” (Highlighting Forum’s.)

Readers are encouraged to review the entire report — but here are Cato vignettes on Maryland governor Martin O’Malley and Virginia governor Bob McDonnell —

Martin O’Malley

“Maryland Martin O’Malley, Democrat — Legislature: Democratic.
Grade: D
Took Office: January 2007

Martin O’Malley has been in politics his entire career, and he has long supported an expansionary approach to government. In his first year as governor, O’Malley signed a $1.4 billion package of tax increases. It included increases in corporate taxes, personal income taxes, sales taxes, and cigarette taxes. O’Malley has been at it again recently, approving increases in income taxes, alcohol taxes, hospital taxes, and tobacco taxes during 2011 and 2012. For singles earning more than $100,000 and couples earning more than $150,000, the top income tax rate was raised to 5.75 percent. Local taxes in Maryland bring the total top income tax rate to 8.95 percent. O’Malley’s legislation also reduced personal exemptions under the income tax. Higher taxes are fueling higher spending in Maryland. The general fund budget jumped more than 13 percent in fiscal 2012.” (Highlighting Forum’s.)

Bob McDonnell

“Virginia
Bob McDonnell, Republican — Legislature: Divided [No longer divided but Republican — Senate became effectively Republican in 2012]
Grade: C Took Office: January 2010

Governor McDonnell has a conservative reputation, but he hasn’t taken any major actions to shrink the Virginia government. McDonnell has signed into law a smattering of small tax increases and tax cuts, but he hasn’t proposed any major tax reforms. McDonnell hasn’t been very conservative on spending either. The Virginia general fund budget increased from $14.8 billion in the governor’s first year of fiscal 2010 to an estimated $17.2 billion in fiscal 2013, which is a 16 percent expansion. To his credit, McDonnell pushed to privatize the government’s liquor stores, but he couldn’t get his own party in the legislature to go along with the plan.” (Highlighting Forum’s.)

Concerns to watch: Virginia conservatives should examine closely what Cato experts call the “Tax Incentive Disease” (start here on p. 8)–

“Unfortunately, most governors support tax incentives. Republican governors often claim allegiance to free markets, but their support of tax incentives amounts to sup­port of central planning. As for Democrats, they often support broad-based tax increas­es that harm businesses, but then they also offer narrow breaks to favored businesses and claim that they are creating jobs.” (Highlighting Forum’s.)

Readers might visit James A. Bacon’s (Bacon’s Rebellion)Do Incentives Buy More Investment… or Better Rankings?” here.

Maryland conservatives should pay special attention to unfunded but overpromised state and local pension schemes (start here on p. 13)–

“Cato’s pension ex­pert, Jagadeesh Gokhale, estimated that the funding gap for accrued benefits plus future accruals is about $10 trillion. On top of that, state and local retirement health plans have huge funding gaps as well. What all this means is that policymakers in many states have created a big fiscal mess that may spawn large tax increases down the road. This report card focuses on short-term taxing and spending, but a fuller assess­ment would also include how the actions of each governor affected the long-term fiscal health of his or her state.” (Highlighting Forum’s.)

An unexpected near tie: governor Jerry Brown of California received a score of 49 (D), governor Bob McDonnell a score of 50 (C).

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Some of our related posts – –

Gov Bob Pitches Loudoun Metrorail: But Is He A Scott Walker?
New State Business Tax Climate Index: MD Among Worst
Fiscal Experts Rate Maryland and Virginia Governors
“Government must create opportunity.” Really, governor?

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