Tax Analysts Blog

Republicans Can Flip the Tax Script in 3 States This Fall

Posted on Jun 7, 2016

While the Republicans have struggled to win the presidency in the last few election cycles, the party has made impressive gains elsewhere. In fact, the GOP could set a record this fall by holding more than 32 governors' mansions at the same time. There are 31 Republican governors, and the races look set up to allow the party to add two or three more on Election Day. If they do, the tax outlook in those states will change dramatically.

Democrats must defend eight of their 12 governors' seats this fall. Five of their incumbents are retiring or looking for a new job. Of those, the Democrats are most likely to lose in Missouri (Gov. Jay Nixon), New Hampshire (Gov. Maggie Hassan), and West Virginia (Gov. Earl Ray Tomblin). The Cook Political Report rates those three races as tossups, while only North Carolina Republican Gov. Pat McCrory looks vulnerable among the four Republican incumbents.

The GOP controls the legislatures in Missouri, New Hampshire, and West Virginia. In Missouri and West Virginia, the sitting Democratic governors have frustrated Republican plans to cut taxes and spending. In all three states, the governors have shown a markedly different approach to balancing the state budgets. If Republicans are able to win these races (and they should be considered the favorites in both Missouri and West Virginia, regardless of the Cook rating), the budget showdowns in 2017 will be quite different.

West Virginia
Behind the leadership of state Senate President Bill Cole, the Republican Party swept to power in West Virginia's Legislature in 2014. It immediately set about trying to impose its agenda on Tomblin. After a relatively successful 2015, Republicans have found it much tougher going in 2016, since the governor has refused to sign a budget that doesn't include tax increases.

Cole, who is running for governor this year, and his colleagues in Charleston have so far resisted the governor's efforts for tax increases. But Tomblin may have all the leverage since he won't be on the ballot again. West Virginia's government will shut down on July 1 without a budget, and Tomblin recently said he would veto a plan that involved one-time patches (including a $183 million transfer from the state's rainy day fund). That would leave lawmakers scrambling to come up with the compromise that has eluded them all year.

West Virginia is a perfect example of a state where the tax picture will change radically depending on the fall races. If Cole wins, tax increases will almost certainly be off the table the next time the state has to patch a budget. A budget under a Cole administration would probably involve spending cuts and savings from further collective bargaining reform as the West Virginia Republicans look to emulate other states in disempowering public sector unions.

Nixon has been a thorn in the side of Missouri Republicans for years. He has consistently vetoed tax cuts, union reforms, and school voucher bills. All in all, Nixon vetoed 94 bills between 2012 and 2015, and he was overridden 33 times during that same period. In fact, Nixon's vetoes have been overturned more than all other Missouri governors' combined.

Nixon has opposed tax legislation virtually every year that the GOP has controlled the legislature. And he has kept Missouri from copying Kansas's so-called supply-side experiment. But his acrimonious relationship with the Republicans in the legislature (in a red state no less) has been costly. The GOP has steadily increased its control of both chambers of the Missouri legislature. Republicans now control 24 of 34 Missouri Senate seats and 116 of the 163 seats in the Missouri House. That's quite a margin for any future Republican governor to work with.

The race to succeed Nixon, who is leaving office because of term limits, is confused. There are four high-profile Republicans in the race, including Lt. Gov. Peter Kinder and businessman John Brunner (the favorite according to the polls). If the GOP is able to coalesce around a candidate, it will certainly be favored in the fall. Missouri has voted for the GOP presidential candidate in every election since 2000 (although it remains to be seen how the candidacy of Donald Trump will affect Republican turnout).

Replacing Nixon with Kinder or Brunner would dramatically change the type of tax legislation under consideration in Missouri. Gone would be plans for gas tax increases. Bills for more school vouchers and right-to-work legislation would almost certainly be passed. And Republicans would look to eliminate at least a few unpopular taxes (something they tried to do last year).

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