Lawrence Person's BattleSwarm Blog

Texas has benefited greatly from having a better economy than the nation as a whole, and Rick Perry made the low-tax, small government model Texas uses the centerpiece of his abortive run for President.

However, the Libertarian Cato Institute seems considerably less impressed with Perry’s job as Governor, as they gave him a C on their Fiscal Policy Report Card. Indeed, his numerical score of 51 is only two points above California’s spendthrift Jerry Brown (!!!) with a D at 49, and lower than the Republican average of 57.

Here’s their knock on Perry:

Governor Perry has a conservative reputation, but he hasn’t cut state taxes substantially or reduced the size of Texas government. Indeed, Perry has presided over steady increases in spending. Between the 2000–2001 biennium when Perry assumed office and the 2012–2013 biennium, state general fund spending rose at an annual average rate of 3.2 percent, and total state spending rose at an annual average rate of 4.6 percent.

His record on taxes is mixed. In 2003 he signed into law a package of tax and fee increases.In 2006 he approved a business tax overhaul that replaced the corporate franchise tax with a modified gross receipts tax called the “Texas Margin Tax.” The new tax hit 180,000 additional businesses and increased state-level taxes by more than $1 billion annually.

The added state revenues were used to reduce local property taxes, but the overall effect of the package has been to centralize government power in the state and reduce beneficial tax competition between local jurisdictions. Nonetheless, Perry has supported increases in small business exemptions for the Margin Tax. And in 2011 he vetoed a bill to tax online purchases. In 2012 he proposed a five-point Texas Budget Compact, which includes transparency in budgeting, a constitutional limit on spending growth, opposition to new taxes, a strong rainy day fund, and the cutting unnecessary government programs.

One reason Perry may not rank better is the report is based on data covering January 2010 to August 2012, so presumably Perry’s work as Governor in the preceding decade isn’t covered (despite it’s prominent mention in the section quoted above). Another is that several higher ranked governors scored well for things like cutting individual income tax rates, while Texas has no state income tax. I also wonder how well they factor in population growth.

While I don’t want to reject Cato’s ranking out of hand, the opaqueness of their rating system (which must necessarily involve a substantial subjective component) makes me very wary of taking it at face value. You would think that Brown would rank much lower, especially with his state’s municipal bankruptcies, tax hikes and the train to nowhere. Though I do think Perry still has considerable room for improvement, I have to take Cato’s ranking of him with several grains of salt.

And if you’re looking for a more readable version of the report, click here.