Fiscal Policy Report Card released by the Cato Institute shows some of America’s governors are fiscally responsible, but many are not.
The nation’s economy was damaged by the pandemic in 2020, but it bounced back strongly and grew until the end of 2021. The rebound generated a large tax revenue increase for state governments, which also received a flood of pandemic aid from the federal government. The states used soaring revenues to expand their budgets and provide individuals and businesses with temporary or permanent tax cuts.
Five governors receive a grade of A: Kim Reynolds of Iowa, Chris Sununu of New Hampshire, Pete Ricketts of Nebraska, Brad Little of Idaho, and Doug Ducey of Arizona.
Eight governors receive an F: Tim Walz of Minnesota, Tom Wolf of Pennsylvania, J. B. Pritzker of Illinois, Gretchen Whitmer of Michigan, Phil Murphy of New Jersey, Kate Brown of Oregon, Gavin Newsom of California, and Jay Inslee of Washington.
The report examines the tax and spending choices made by the governors and discusses recent policy trends. Twenty‐one states have cut individual or corporate income tax rates since 2020, and about 20 states have provided one‐time tax rebates. Meanwhile, many states have expanded tax revenues from marijuana, gaming, and online sales. Another important trend is the interstate migration of residents from high‐tax states to low‐tax states.
Current state budget surpluses may diminish if the U.S. economy continues to stagnate. Fortunately, most states have built large rainy day funds, which they can tap if tax revenues fall in the months ahead. Governors should focus on pruning low‐value programs from budgets and pursuing growth‐enhancing reforms such as income tax rate cuts.
Download the full report pdf.
Originally published by the Cato Institute. Republished with permission.
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