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A Tax-and-Spend Revival in the States?

eye on the news

A Tax-and-Spend Revival in the States?

Incoming Democratic governors are likely to pursue a familiar agenda. November 7, 2018
Politics and law
Economy, finance, and budgets

If recent history is any guide, Democratic triumphs in last night’s gubernatorial races portend a tax-and-spend revival in a host of states, after years of comparative taxing discipline. We might be restarting a cycle that began a decade ago.

Shortly after Barack Obama moved into the White House in 2009, a red tide began sweeping through state capitals amid a sluggish national economy and a wave of federal and state tax increases. Over eight years, voters installed Republicans as governors in 33 states, up from 22 in 2008, and turned control of 31 state legislatures over to the GOP, a sharp increase from only 14 in the year that Obama won office. Today, the national economy is much stronger than when the red wave started, but there’s a controversial Republican in the White House, and of the 36 governor’s races this year, Republicans had to defend their turf in 26 of them. The result yesterday wasn’t quite a blue wave, but it did amount to a net pickup of seven governor’s positions for Democrats, though several of the victories may have had as much to do with historical voting patterns as with President Trump.

In a handful of states where Democrats took back the governor’s mansion, voters have a history of alternating between candidates of the two parties over eight-year cycles. In Maine and Michigan, for instance, voters haven’t elected a governor of the same party for more than eight consecutive years in decades. That made the task of Maine’s Republican gubernatorial candidate, Shawn Moody, and Michigan’s GOP choice, Attorney General Bill Schuette, daunting after eight years of Republican rule. It also didn’t help that in these politically competitive states, where Democrats have an edge in voter registrations, both Republican candidates aligned themselves with Trump. Earlier this year, in a hotly contested Republican primary that divided the party, Schuette, embraced by officials of the Trump administration, defeated a candidate endorsed by incumbent Michigan governor Rick Snyder. Moody, a recent Republican convert, ran as a kinder, gentler version of a Trump-style outsider, a wealthy businessman who told voters that though he was a GOP newcomer, he planned to “die a Republican.” Democrats won by comfortable margins in each state.

Holding Illinois, a state ranked solidly Democratic by Gallup, was never going to be easy for Republican governor Bruce Rauner. But the retired financial executive made his task more difficult when he adopted a strategy of facing down the state’s overwhelming Democratic legislature in an all-or-nothing bid for reform, which resulted largely in four years of gridlock in Springfield. Even Rauner’s own party representatives abandoned him when they aligned with Democrats to pass a state budget in July 2017, over the governor’s veto. Now the task of fixing Illinois’ extensive fiscal problems, including one of the worst-funded state pension systems in America, falls to Democrat Jay Pritzker, a wealthy businessman who pumped some $170 million of his own money into his campaign and has called for raising revenues through new sources, including legalizing sports betting and marijuana. Illinois’ financial challenges will require much more.

Wisconsin’s Scott Walker had shown a remarkable ability to engineer political comebacks in his eight controversial years in office, but he pushed his luck by trying for a third term in a state where that’s been rare. Walker was Democrats’ Number One target among Republican governors after signing 2011 legislation that curtailed the power of public-sector unions in Wisconsin. He survived a recall election in 2012, and won reelection two years later. His opponent this year, state schools superintendent Tony Evers, banking on the idea that voters might be experiencing Walker “fatigue,”  ran ads claiming that, “After eight years, it’s time for a change.” The race narrowed in the final days, but Walker appears to have lost a close contest because independent voters turned toward Evers. 

Democratic gains could have been higher, but Republicans appear at this point to have held onto governor’s mansions in several competitive states, including in Georgia, where incumbent Nathan Deal was term-limited. In a race that defied the trend in other states, Secretary of State Brian Kemp, running as a Trump conservative, seems to have edged out Democrat Stacey Abrams, though she is calling for a recount in the close race, which featured appearances by Trump in support of Kemp, and Oprah Winfrey campaigning for Abrams. Similarly, Republican congressman Ron DeSantis, calling himself the “top conservative in Florida,” narrowly edged out Tallahassee mayor Andrew Gillum, who was dogged by reports of an FBI investigation into corruption in the city he led.

Perhaps equally as telling were Republican incumbents holding their jobs in two heavily Democratic states—Maryland and Massachusetts. Both incumbents, Larry Hogan and Charlie Baker, respectively, have distanced themselves from Trump and compromised with Democrats on key issues. When Maryland tax officials, for instance, calculated that the Trump tax cuts would result in hundreds of millions of dollars in higher state tax collections, Hogan battled with Democrats over what to do with the extra money. Hogan wanted to give most of it back to taxpayers, but when Democrats balked, he signed compromise legislation that returns some of the money, but keeps about $200 million for the state. Baker, who has been openly critical of Trump, even calling some of his positions “un-American,” has won high marks for managing state government and consistently earned the distinction during his first term as America’s most popular governor, a startling achievement in today’s political environment for a Republican in a heavily Democratic state. Both Hogan and Baker won by double-digit margins.

Political control in the states rests on more than who sits in the governor’s chair. The composition of state legislatures changes more slowly than the governorship in many places. But over the last decade, Republicans managed to make a net gain of more than 900 state legislative seats throughout the country, in the process swinging 17 state legislatures toward their control. One result was that Republicans enjoyed 26 so-called state “trifectas,” that is, states where they controlled the legislature and the governor’s office. Yesterday, the GOP lost four of those trifectas. In New Hampshire, the party retains the governorship but yielded control of the legislature. The Wisconsin GOP retained the legislature, but lost the governor’s seat. Still, the party leads Democrats by 22 to 14 in trifectas, even after Democrats picked up total control in a few states, such as New York, where the state senate—the last holdout for the GOP in state government—went blue. In the rest of the states, party control remains divided, as it now is in Washington.

The question remains whether Democrats, having gained control in more states, will respond as they did after their victories in 2008—by raising taxes. Indeed, prompted by new taxes in a number of Democratic states, 2009 turned out to be a record year for state tax hikes—with a net of nearly $29 billion. With budgets today squeezed in many states thanks to the slow growth of tax revenues, along with rising costs (especially Medicaid), there’s reason to believe that something similar is on the horizon. Democratic candidates ranging from Wisconsin’s Evers to Connecticut’s Ned Lamont to Illinois’ Pritzker called for higher taxes during their campaigns. That could make state elections over the next four years even more interesting than yesterday’s.

Photo by Scott Olson/Getty Images

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