Jindal Receives “A” Grade for Fiscal Policy
Cato Institute ranks Governor second in nation
Today the Cato Institute released its 2010 Fiscal Policy Report Card on America’s Governors, and awarded Governor Bobby Jindal one of only four A grades. Each governor received a score for his past two year’s fiscal performance, from a limited government perspective, and Jindal’s 71 out of 100 had him second only to Mark Sanford (R) of South Carolina.
Cato’s 2010 report card is the tenth in a biennial series which looks at data from almost every state and objectively awards a grade based on two spending and five revenue and tax considerations. The report’s author, Chris Edwards, included per capita spending and taxation burdens, their relative rise or decline during the two years, and marginal tax rates on personal and corporate income, general sales, and cigarettes.
A high score tends towards cuts in taxes and spending, and the next two governors to receive A grades, tied for third place, were Tim Pawlenty (R) of Minnesota and Joe Manchin (D) of West Virginia. On the other hand, tax and spending hikes lower a governor’s score, and seven received F grades. Connecticut, New York, and Oregon, with a lowly 19, rounded out the bottom three. (The report did not include five governors – Kansas, New Jersey, Virginia, and Utah, and Alaska – either because they have not been in office long enough or, in the case of Alaska, because of “peculiarities in the state’s budget that make comparisons difficult.”)
Edwards profiled each state executive and described Jindal as a “top performing governor with regard to both his tax and his spending policies.”
“In 2008, Jindal repealed previous income tax increases to save Louisiana residents more than $350 million a year. He has also provided some modest business tax cuts and opposed efforts to raise taxes. Jindal has consistently proposed reductions in the state budget, with the result that proposed spending in fiscal year 2011 is expected to be 17 percent lower than spending his first year in office, FY08.”
However, Edwards’ assessment of Jindal was not rosy on all accounts.
“Jindal has succumbed to the tax credit disease and supported special interest breaks for film production, music recording, and other activities.”
This “tax credit disease” is a growing trend that Edwards has observed in his work on this year’s and the 2008 report, even if this parameter is not explicitly accounted for in the ranking’s index.
“Tax codes are getting more complex, particularly on account of tax credits to dozens of politically favored lobbies… For example, 44 of the 50 states offer tax credits for film production. Why should Hollywood film companies receive preferential treatment over any other business?”
If states wish to improve their fiscal situation, Edwards suggests they “repeal state corporate income taxes,” and he believes this to be particularly applicable to Louisiana, since the state’s corporate rate is 8 percent, above the national average of 6.5 percent.
“These taxes provide little revenue but create huge complexity for businesses. So states without corporate income taxes, such as Nevada and New Hampshire, stand out as beacons for free enterprise.”
Another insight from these reports is that Republicans enjoy a slight but clear advantage over their Democratic colleagues—an average score of 55 versus 47. This holds consistent with the 2008 scoring disparity of 55 to 46, using identical methodology. Of the seven governors to receive F grades, only one – Jodi Rell of Connecticut – was a Republican.
“The hard data does show that Republicans do a little better on spending and a lot better on taxes,” said Edwards when interviewed.
There are, however, some notable exceptions. Democrat Joe Manchin of West Virginia garnered one of this year’s four A’s. Correspondingly, high-profile republican governors Charlie Crist of Florida, Arnold Schwarzenegger of California, and Jan Brewer of Arizona all scored below 50 and garnered D grades.
Since Cato’s report employs data from 2008 to the present, it focuses on a period when states have faced severe budget challenges on account of the current recession. Lower tax revenues meant state spending has fallen by an average of 4 percent since 2008, and the report details some of the interesting fiscal moves made by governors during that period. By comparison, a relatively more prosperous economy meant general spending by states rose by an average of 47 percent between 2000 and 2008.