Chafee’s Fiscal Record in Rhode Island

June 3, 2015
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Lincoln Chafee, former U.S. Senator and Governor of Rhode Island, will announce his presidential run this week.  Chafee’s fiscal record as governor was moderately liberal, but much more centrist than Maryland’s Martin O’Malley.

Chafee served as governor of Rhode Island from January 2011 to January 2015, first as an Independent and then as a Democrat. (He was a Republican during his time in the U.S. Senate.) During his tenure, he received a “D” and a “B” on Cato’s Fiscal Policy Report Card on America’s Governors.

State spending grew substantially while Chafee was governor. From fiscal year 2011 to fiscal year 2012, Rhode Island general fund spending grew 5.2 percent and it grew another 5.1 percent from FY2012 to FY2013, according to data from the National Association of State Budget Officers (NASBO). NASBO data shows a 17 percent during Chafee’s entire tenure. This is almost three times population growth plus inflation for the state during his tenure.

Chafee promoted some tax increases to fund his expansion in government. In 2012 the state raised the cigarette tax. The sales tax base was expanded to cover clothing, pet services, and taxi rides. Sales tax base expansions can be the right pro-growth policy if they are combined with tax-rate cuts, but that was not on the case in Rhode Island. Chafee’s original proposal included even more tax increases, but the legislature prevented several from taking effect, such as an increase in the state’s meal and beverage tax.

Thankfully for Rhode Island, Chafee also supported numerous pro-growth reforms. Rhode Island’s tax reform package that passed in 2014 helped Chafee’s score in the most recent report card. The plan cut the corporate income tax from 9 to 7 percent, reduced the estate tax by increasing the exemption, and repealed the state’s franchise tax. He also supported a robust pension reform plan in 2011 that raised the retirement age and eliminated cost-of-living adjustments for beneficiaries.

Chafee joins a crowded presidential field with his announcement this week. For a Democratic Party that has moved far to left, he seems to have a more sensible fiscal approach than others in his party.

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