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Where Are All the State Tax Cuts?

Tuesday, October 4, 2016 11:59
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(Before It's News)

If you follow state policy issues, you may think that there has been a lot of tax cutting recently because of high-profile reforms by Mike Pence, Sam Brownback, and a few other governors. I examine those reforms in Cato’s 13th biennial fiscal report card on the governors, released tomorrow.

However, a chart from NASBO shows that recent tax cutting across the 50 states has been limited and mainly offset by tax hiking. The chart shows net state revenue changes from legislated cuts/hikes since 1979. In 2017, for example, the dollar value of hikes is expected to outweigh cuts.

NASBO

That is a disappointing because there is usually a trend toward tax cutting during economic expansions, or at least there was during the 1990s. Recent tax cuts in places such as Florida, Indiana, Maine, New York, North Carolina, and Texas have been offset by hikes in places such as Alabama, Connecticut, Delaware, Nevada, Pennsylvania, and South Dakota.

What makes the current dearth of tax cuts odd is that state legislatures have become more Republican since the 1970s. The Wall Street Journal had a chart yesterday showing that the share of state legislature seats held by the GOP has risen from 40 percent in the 1980s to 55 percent today.  

Republicans are supposed to be the tax-cutting party. That is the core of their “brand.” So why isn’t there more tax-cutting? One reason is that some Republican governors start siding with special interests over taxpayer interests after they have been in office a while. They forget that they are supposed to work for all the citizens, not just the ones lobbying for more government spending. Nevada’s Governor Brian Sandoval seems to be a good example, as I discuss in the report tomorrow.

Another problem is that in some state legislatures that are nominally Republican, some of the members have chosen that label only because it was advantageous for election and reelection. In South Carolina, Governor Mark Sanford and then Nikki Haley long pursued major tax reforms, but to little avail.

A final problem is that the Democratic Party has moved to the left on fiscal issues. Andrew Cuomo of New York is about the only Democratic governor in recent years who has been amenable to substantial tax reductions.

Learn what grades Cuomo, Haley, Sandoval, and the others earn on their recent fiscal performance in tomorrow’s report.

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