In the Cato Institute’s Fiscal Policy Report Card on America’s Governors for 2006, Kansas Governor Kathleen Sebelius earns the grade of “D.” She earned the same grade on their previous survey.
Fortunately, Kansas may not be in the bad condition that the low grade of our governor might indicate. That’s because the Cato methodology includes governors’ policy recommendations as well as actual results. Had all of Governor Sebelius’s recommendations and desires made it into law, we in Kansas would very well be in trouble.
How did Governor Sebelius fare so poorly? According to the report: “Governors who have cut taxes and spending the most receive the highest grades. Those who have increased spending and taxes the most receive the lowest grades.” What is unusual and good about this report is that it considers what governors recommended, as well as what actually happened.
This is important. Governor Sebelius takes credit for having no increases in taxes during her term. That’s not for trying, though. Her proposed tax increases were rejected by the legislature. The Cato study, however, sees through that, and grades her accordingly.
Why are low taxes important? From the study:
This report card emphasizes the importance of tax cuts in general because the evidence shows that states that reduce taxes improve their prospects for economic growth. For example, a 1996 study by Zsolt Besci of the Federal Reserve Bank of Atlanta found that “relative marginal tax rates have a statistically significant negative relationship with relative state growth averaged for the period from 1961 to 1992.” The message of the study for state governments is that “lowering aggregate state and local marginal tax rates is likely to have a positive effect on longterm growth rates.” A study for the congressional Joint Economic Committee by Richard Vedder of Ohio University came to a similar conclusion. A study by Thomas Dye of Florida State University found that states with no income tax had higher personal income growth (and smaller government growth) than states that had an income tax.
Tax changes enacted in the states offer a useful laboratory for exploring the effects of tax policy. A comparison of the economic performance of the 10 states that increased taxes the most with the economic performance of the 10 states that cut taxes the most during 1990–2005 suggests that when states reduce taxes they improve their relative economic performance.
Kansas, as has been noted, has a relatively high tax burden, and had our governor had her way, our taxes would be higher now. As poor as our economic growth and job growth has been recently, it would undoubtedly have been worse had our governor been able to pass the tax increases she proposed.
But there’s something even more important than economic growth and jobs at stake. Collecting more tax revenue and spending more means Kansas government is getting larger, and that’s been happening even though there has not been a tax increase. Large and powerful governments, be they local or national, are the opposite of liberty and freedom. That’s why Kansas Governor Kathleen Sebelius, with her only partially unfulfilled goal of higher taxes and larger government, personifies Ludwig von Mises’s admonition that “government is essentially the negation of liberty.”