December 2012 Brief: Volume 19, Number 34
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Governor Branstad Earns a “B”
by Deborah D. Thornton
Iowa’s Governor Terry Branstad is doing a good job, but isn’t an “A” student – yet.
Each year the Cato Institute, a limited-government, individual-liberty think tank researches and issues a report on how the nation’s Governors are leading and financially managing their states. For 2012 four Governors (all Republicans) have earned an “A” – Sam Brownback of Kansas, Rick Scott of Florida, Paul LePage of Maine, and Tom Corbett of Pennsylvania. Most of us are familiar with their successes and challenges. On the other end five Governors earned an “F”— Pat Quinn of Illinois, Dan Malloy of Connecticut, Mark Dayton of Minnesota, Neil Abercrombie of Hawaii, and Chris Gregoire of Washington. Unsurprisingly to students of public policy, all five are Democrats.
As a result of the 2008 recession and continuing economic malaise, many states are dealing with major fiscal deficits and management issues. How the Governor approaches these issues is critical to the long-term fiscal success of the families and workers of Iowa. According to the Cato rubric, Governors earn an “A” by reducing tax burdens and cutting spending. Those earning “F”s instead increase taxes and spending in order to expand government programs.
Historically, Cato gave Governor Branstad “fairly poor” reviews, based on his spending increases. In the last two years, spending has continued to increase, but the overall size of government as measured by the number of government employees has decreased by about 6 percent. His stated goal is to reduce the “size and cost of government by 15 percent.”
On the tax end, Branstad has actively pursued commercial property tax reform, proposing cutting the assessment from 100 to 60 percent of the market value. He also wants to lower the corporate income tax rate by half. Unfortunately, our divided Legislature, with the House controlled by Republicans and the State Senate controlled by Democrats, has resulted in a stalemate on tax reform. Following the November elections, this situation will continue.
The following table outlines the grading standards. Governor Branstad has earned an overall score of 55, a “B” on the curved grading system. He earned a 57 on both spending and revenue criteria by proposing only a 3 percent per capita spending increase, and signing budgets with slight reductions. On the tax-rate variables, measured by changes up or down in personal and corporate income-tax rates, sales taxes, and the cigarette-tax rate, he earned a 51, based on no up or down changes. Successfully lowering these rates would have earned a higher score.
The highest score was 69, earned by both Sam Brownback of Kansas and Rick Scott of Florida. Brownback simplified the Kansas personal income-tax structure to two rates, and lowered the top rate from 6.45 to 4.9. He also increased the standard deduction, reduced taxes on small businesses, and addressed several special-interest tax breaks. Taxpayers should save about $800 million a year.
In Florida, Scott is supporting substantial budget cuts, vetoing millions of dollars in spending, cutting government employees, and reducing small business corporate-income taxes. Unfortunately, a constitutional amendment to increase the personal property-tax exemption from $25,000 to $50,000 for small businesses failed in November. An amendment limiting the growth of state government spending based on a combination of inflation and population changes also failed. Part of this failure was because the ballot included 11 different proposed amendments.
On the other end, two of the lowest-scoring Governors are our neighbors in Illinois and Minnesota. The failure of the Illinois Legislature and Governor to address their fiscal problems through any method except tax increases is well-documented. Pat Quinn has increased tax collections by over $8.1 billion, issued billions of dollars of bonds to pay current bills, and raised personal, corporate, cigarette, and estate taxes.
In Minnesota, Governor Mark Dayton increased general-fund spending by almost 10 percent his first year in office. He attempted to increase personal-income-tax rates, business taxes, and property taxes on “higher-valued” homes. Iowans welcome families and businesses who wish to move across the river or south across the border to our state.
We congratulate Governor Branstad on working to improve the financial well-being of our citizens through reducing taxes on both businesses and families, and controlling government spending so that the money we pay in taxes is not wasted. Hopefully, the Iowa Legislature will work cooperatively with him during the 2013 session to help get his grade up to an “A.” If this happens, like proud parents and grandparents, we will all be happy.
Deborah D. Thornton is a Research Analyst with Public Interest Institute, Mount Pleasant, Iowa. Contact her at Public.Interest.Institute@LimitedGovernment.org.
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