With Rick Perry in Race, Which Governor Has the Best Record?

The 4 governors vying for nomination have mixed records on state taxes, spending

Aug. 12, 2011 -- Rick Perry's entrance to the presidential field means a fourth sitting or former governor has entered the field. The nine announced GOP presidential candidates run the gamut when it comes to their political backgrounds. Three served in the U.S. House, one served in the Senate, one has never held elected office.

Governors can tout their executive experience, which voters in recent years have responded well to. Recent presidents Ronald Reagan, George W. Bush, and Bill Clinton were governors before entering the White House.

The newest addition to the ever-expanding circle of presidential contenders is Texas Gov. Perry, the longest-serving governor in state history. For Perry, who will officially announce his presidential bid on Saturday, accomplishment No. 1 is job creation.

Over the past year, Texas' job growth was twice the national average. In fact, of all the jobs created since June 2009, 30 percent – about 295,000 jobs – were created in Texas, according to a report from the Dallas Federal Reserve which analyzed data from the Bureau of Labor Statistics.

"It's a pretty large number no matter which way you look at it," said Mine Yucel, vice president and senior economist at the Dallas Federal Reserve. "Texas has added a disproportionate share of jobs and it has grown faster than the rest of the U.S."

Yucel said much of this job growth can be attributed to Texas' low tax rate – the state has no income tax -- few regulations and a law limiting tort litigation. Texas, according to Perry, is the "epicenter of growth."

But Lis Smith, spokeswoman for the Democratic Governors Association, said Texas's lower unemployment rates have less to do with Perry's policies and more to do with Texas's natural resources.

"Rick Perry has touted the Texas miracle, but it's more like the Texas tall tale," said Smith. "Just remember that the growth he talks about has been driven by factors he didn't control like rising oil prices and increased military spending."

The Texas unemployment rate has been below the national average for his entire decade-long tenure. The most recent jobs report showed that at 8.2 percent the Texas unemployment rate was 1 percentage point lower than the national average.

"Someone had put a report out that the first state that's coming out of the recession is going to be the state of Texas ... I said, 'We're in one?'" Perry said in September 2009.

Still, 25 states had a lower unemployment rate in June 2011 than Texas, including Pawlenty's state of Minnesota in which 6.7 percent of the population is unemployed.

And while Minnesota's unemployment has now dropped off from its peak of 8.3 percent in 2010, the state was plagued by budget struggles while Pawlenty was governor.

Pawlenty took office in 2003 when the state's budget was facing a $2 billion shortfall. Within his first year as governor Moody's rating agency downgraded Minnesota from a perfect AAA credit rating to AA1, one step lower, citing short-term fixes to long-term budget woes as the reason for the downgrade.

"Pawlenty came in with a structural deficit and he basically managed that structural deficit but never solved it," said Larry Jacobs, director of the Center for the Study of Politics and Governance at the University of Minnesota.

Jacobs said a combination of lagging revenues because of the recession and Pawlenty's staunch opposition to raising taxes led to the $5 billion projected budget deficit for the next biennium that Pawlenty left to his successor when he departed office in January 2011.

"He did everything he could to prevent raising new revenue," Jacobs said. "The state had a rainy day fund that was spent and money from a settlement with tobacco companies that was spent. He certainly gets credit for blocking new state taxes and the rate of spending slowed down."

Conversely, during Massachusetts Gov. Mitt Romney's tenure from 2003 to 2007, he petitioned the S&P credit rating agency to increase his state's credit rating from AA- to AA, which they did in 2005, according to a report obtained by Politico.

"Over the last few years, Massachusetts has taken certain actions that have reduced budget uncertainty, reined in spending, and prudently managed resources during a difficult national economic slowdown," Standard & Poor's said in the March 2005 report according to Politico.

But the credit upgrade did not come without a cost. In 2002 Massachusetts raised more than $1 billion in additional tax revenue and in 2004 the state increased fees such as those for drivers' licenses, raising an additional $271 million annually, according to the report.

In Thursday night's Fox News debate, the two Minnesotans sparred over tax increases. Congresswoman Michele Bachmann attacked Pawlenty for raising cigarette taxes from 48 cents per pack to $1.50 during his tenure.

"I did agree to the cigarette fee," Pawlenty said in the debate. "I regretted that. The courts held it to be a fee. But nevertheless it was an increase in revenue."

Perry has also taken heat for his tax policies. During Perry's 2010 primary battle, opponent Sen. Kay Bailey Hutchison accused the governor of raising taxes on businesses by creating a 1 percent margins tax on business receipts.

Perry countered that he had, in fact, lowered business taxes by eliminating the 4.5 percent franchise tax in favor of the lower margins tax. And while at face value the tax rate did decrease, revenue increased. According to the Austin American Statesman, revenue from the franchise tax was $5.8 billion in 2006 and 2007. But in the first two years under the margin tax revenue rose to $8.7 billion.

"I think Perry's margin tax in Texas is a destructive type of tax," said Joseph Henchman, the vice president of state projects for the Tax Foundation. "You have taxes being levied on taxes based on how many levels of production a product has. It basically encourages people to form conglomerates purely for tax reasons which is economically destructive. You have these taxes pyramiding on each other so the effective rate is higher."

In his four years has the governor of Utah from 2005 to 2009, Jon Huntsman simplified the Utah tax code by swapping a six-bracket income tax system for one 5 percent flat tax.

"Huntsman's flat tax achievement is an achievement," Henchman said. "It reduced complexity and it made it a much more growth-friendly tax system."

Henchman said former Romney is the only GOP candidate who saw income taxes decrease while he was in office, albeit slightly, from 5.6 percent when he took office in 2003 to 5.3 percent by the time he left in 2007.

Massachusetts residents have historically had a one of the highest tax burdens in the country, consistently ranking in the top 10 states, Henchman said. When Romney was in office the state dropped out of the top 10, falling from having the eighth-highest tax burden in 2005 to the 13th in 2006.

At the Iowa State Fair Thursday, Romney took questions from a rather heated audience. In response to a question about whether he would close corporate tax loopholes, Romney reiterated that he absolutely would not raise taxes.

"There are a lot of people who use the word 'loophole' to say, 'Let's just raise taxes on people.' And that I will not do. I will not raise taxes," Romney said.

But, then again, all of his GOP opponents say they will not raise taxes either.

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