Snyder’s 8 Years Get ‘B’ On DC Think Tank’s Fiscal Report Card
Business tax and pension reform helped his grade, gas tax hike did not
As Gov. Rick Snyder nears the end of his eight years in office, a national free-market think tank gives him high marks for his fiscal policy.
The Cato Institute gave Snyder a “B” grade on its 2018 Fiscal Policy Report Card on America’s Governors.
Just five governors received an “A” grade and all five were Republicans. The highest grade received by a Democrat was a “C,” given to Montana Gov. Steve Bullock.
The scores were based on the average of seven measures of how well a governor held the reins on state spending and taxes using a 1-to-100 scale. Snyder finished with a score of 55 which left him as the lowest-scoring “B” grade governor. Bullock’s score was a 54.
Governors received scores in the categories of spending, revenue and tax rates.
Snyder received a 59 in spending, a 56 in revenue, a 50 in tax rates, for the average of 55. The highest scoring governor was New Mexico’s Susana Martinez, who got a 73, while the lowest scoring governor was Washington’s Jay Inslee, who received a 23.
“The governor has pursued important reforms, such as restructuring Detroit’s finances and signing into law right-to-work legislation,” Cato stated in the summary of Snyder. “Snyder has made important tax reforms. He repealed the damaging Michigan Business Tax and replaced it with a less harmful corporate income tax.”
“In 2017, Michigan enacted pension reforms for public school employees, enrolling new hires in a defined contribution plan with the option of a hybrid plan,” Cato’s report stated. “This reform, championed by Snyder, will substantially reduce the system’s future costs.”
Cato also criticized Snyder for increasing taxes, however.
“In 2015, he increased gasoline taxes and vehicle fees to raise more than $500 million a year. Snyder and the legislature pushed through this tax package despite Michigan voters having rejected by an 80–20 margin a sales and gas tax increase for transportation on a May 2015 referendum (Proposal 1). That rejection was ‘the most one-sided loss ever for a proposed amendment to the state constitution of 1963.’ Yet later that year, Snyder and the legislature hiked taxes for transportation anyway.”
Two state economists generally agreed with the B grade given to Snyder.
“I would give Snyder an A-,” said University of Michigan economist Don Grimes. “Along with Cato comments, he arranged state support for the bailout of Detroit. I would never have believed the state legislature would have done that. Only criticism is not enough financial support for higher ed and apprenticeship training. But all in all, a very good governor.”
“The Cato analysis is a good one,” said Gary Wolfram, the William E. Simon Professor in Economics and Public Policy at Hillsdale College, as well as a member of the Mackinac Center Board of Scholars. “The elimination of the Michigan Business Tax was probably the most important thing, as the tax was complicated, costly and very inefficient from an economic standpoint. The imposition of the vehicle fee and the increase in the gasoline tax was actually a much sounder way to fund road improvement than Proposal 1. Cato could have pointed out that Proposal 1 raised the sales tax, altered school financing and local government financing, etc. The DFP [Detroit Free Press] called it ‘likely one of the most complicated and confusing questions ever placed on a Michigan ballot.’ So it was not just a ‘raise taxes to fund roads’ issue.”
The report card notes that Michigan voters will decide whether the state will legalize and tax the recreational use of marijuana. Wolfram expressed doubt about the relevance of that question to Synder’s fiscal record.
“I’m not sure how the recreational marijuana issue has much to do with the governor,” Wolfram said. “The legislation that regulated and taxed medical marijuana, which had become legal under a 2008 initiated law, was definitely a positive both for clarity under the law and for state revenue. Otherwise, I think Cato did a fairly nice job of looking at the Snyder report card.”