Two governors—Scott Walker of Wisconsin and Chris Christie of New Jersey—have gained national attention for their changes to government pension and union rules. But other state leaders are making breakthroughs on taxes, and they are the focus of Cato’s new “Fiscal Policy Report Card on America’s Governors.”
Four governors received an “A” grade: Sam Brownback of Kansas, Rick Scott of Florida, Paul LePage of Maine and Tom Corbett of Pennsylvania. Messrs. Scott and Corbett have been the most tightfisted on spending, but all four “A” governors are outstanding tax reformers.
Gov. Sam Brownback cut the top individual tax rate in Kansas to 4.9% from 6.45%, increased the standard deduction and cut taxes on small business income. This tax cut was the biggest tax cut of any state in recent years relative to the size of its economy.
Gov. Rick Scott ended Florida’s corporate income tax for thousands of small businesses. He is also moving ahead with cuts to property taxes on business equipment, which are a big hindrance to economic growth.
Gov. Paul LePage cut Maine’s top individual tax rate to 7.95% from 8.5% and simplified income tax brackets. He also signed a bill to cut the top rate to 4% over time if there are sufficient budget surpluses. Mr. LePage’s ultimate goal is to phase out the individual income tax and cut the corporate tax rate in half, to 4%.
Gov. Tom Corbett slashed Pennsylvania’s Capital Stock and Franchise Tax and hopes to fully repeal it by 2014. That sounds like an obscure reform, but this tax imposed an $800 million annual burden on businesses. Mr. Corbett is right that it “is a job‐killer… We don’t need it. We don’t benefit from it, and we must get rid of it.”
That type of can‐do attitude toward business tax cuts is exemplified by Michigan’s Gov. Rick Snyder, who received a “B” grade overall. Mr. Snyder scrapped the hated Michigan Business Tax and replaced it with a less costly corporate income tax to save businesses $1.6 billion a year.
His next goal is to reduce the state’s $1 billion burden of personal‐property taxes on businesses. These levies—which are imposed on machinery, equipment and other movable assets—are some of the most anti‐growth taxes in America. Everybody benefits when businesses buy machines and expand production, but personal property taxes directly penalize that job‐creating activity.