During his two terms as governor of Arizona, Doug Ducey managed to pass a flat income tax with a rate of 2.5 percent, reform public sector pensions, universalize important school choice measures, reform occupational licensing rules, turn a budget deficit into a surplus, and substantially shrink the size of the government workforce. He also built a makeshift border wall out of shipping crates, pushed back on marijuana legalization, and was accused of doing both too much and too little by his constituents during COVID. Today, he runs Citizens for Free Enterprise. 

In December, he received the Reason Foundation's Savas Award for Privatization, which is given annually to someone who is advancing innovative ways to improve the provision and quality of public services by engaging the private sector. The former governor and Reason's Katherine Mangu-Ward sat down to talk about his worries about the future of the Republican Party, his commitment to fusionism, and why Arizona politicians are so weird.

Watch the full video here and find a condensed transcript below. 

Katherine Mangu-Ward: What is it about Arizona that seems to just generate a kind of heterodox or unorthodox politician?

Doug Ducey: I don't know. I think it's a good question. I think maybe the fact that we're the youngest state in the lower 48, that we're a place where so many people came to live. So few people that are there today, were actually born there. So people make that decision. And then I think there's something about the West and the spirit of Barry Goldwater, where it brings an independent-mindedness to it.

Mangu-Ward: Arizona has been red of late, but it's trending blue. What do you attribute that to? 

Ducey: Candidates matter. I would actually push back pretty hard. I was able to win in 2014 with the wind at my back and win by a larger margin in 2018 with the wind in my face in what was really a tough year for conservatives and Republicans around the country. And I was also able to capture 44 percent of the Hispanic vote against an opponent named David Garcia. 

So if you have the right candidate, who's talking about common sense kitchen table issues, and actually persuading the electorate, I think the state is still a center-right state. If you have somebody that wants to come and relitigate 2020 and only speak to the base, that's a losing message. 

Mangu-Ward: You campaigned in your first campaign on bringing taxes in Arizona as close as possible to zero, and you got to a 2.5 percent flat tax in the end. How did you do that? 

Ducey: Persistence, persistence, persistence. It was our goal. Every year we lowered or simplified taxes and we actually had the left overreach and came into Arizona and I think deceived the voters with an initiative saying, "We can put 1 billion dollars additional into K-12 education and it won't cost you any money, only the rich people." And they took our 4.5 percent tax at the highest progressive level to 8. Now, 8 percent in Arizona would have been a cancer that would have metastasized over decades. That's Bernie Sanders' Vermont, Washington, D.C., or New York state. But it was popular. We worked hard to beat it. It was polling at about 65-35. We were able to drive it down to 51 percent on election day. 

But when I was a young boy, there was a show on Saturday morning, Wild World of Sports, and they would talk about the thrill of victory and the agony of defeat. We suffered about 18 months of the agony of defeat while we challenged the initiative in court and eventually got to our Supreme Court. And then we reformed taxes in the legislature in the interim. The law, the initiative, was struck down and we had reduced taxes along the way. So had we been successful on election day, taxes in Arizona today would be 4.5 percent. But because we had a bad result, we persisted in the legislature and we had a Supreme Court that was not going to let out-of-state interest deceive the voter. Today, we have the lowest flat tax in the nation. So I would say a combination of good planning, good timing, and good luck.

Mangu-Ward: Is this something that other states can duplicate? I mean, this sounds like a lot of things coming together just right.

Ducey: Well, I believe so. I mean, I think if you make a pledge to your constituents that you're going to simplify taxes every year and you win on that, then you have the permission to do that. If you can grow your economy, you have surplus funds. So it allows you to basically buy down your tax rate. And I'm a huge fan of the flat tax. I want us to be fair and equitable. And I think a flat tax makes a lot of sense. And it's also very hard for the left to change because people understand it. Massachusetts is not known for being a low-tax state, but they do have a 5 percent flat income tax and they've not been able to change that or raise it. And today in Arizona, like I said, we're at 2.5 percent. But if you get your economy growing and that's my background, Katherine, I came from the private sector at Cold Stone Creamery, the ice cream company was my business. And I ran on a platform of kickstarting the economy. Now I want to shrink a government and grow the economy. I was looking at places like Texas and asking, why are they so successful in comparison to other states? And I was trained coming out of University of Procter and Gamble [PG]. PG is a big fan of best practices of something called "search and re-apply." If you see another good idea anywhere in the world, you bring it back to headquarters with attribution. 

In politics, I found people find good ideas all over the country and bring them back to their state, often without attribution. But Texas was the model. [Former Texas Gov.] Rick Perry and governors before him had turned an oil and gas state into a cosmopolitan place with international businesses that did business around the world. I saw no reason at all why Arizona couldn't occupy that space. And I also was aware of the bad decisions that California was making. So I thought we were perfectly positioned and I wanted to be the chief salesperson and spokesperson to do that. 

When I came into office, we had a billion-dollar deficit that first year. I think the first tax reform that we were able to pass was to make certain that you weren't indexed out with inflation. And that was the start. We got the budget under control. The economy began to grow and we were able to ratchet that tax code down.

Mangu-Ward: I think sometimes, particularly in the modern GOP, you get a lot of emphasis on tax cutting and a lot less on the reduction of spending or balancing the budget. Do you think that issue is getting worse? Do you think that there's a way to reconnect to those two ideas in American political rhetoric or in voters' minds?

Ducey: Well, Katherine, I think you live here in Washington, D.C., and that's what you are responding to as to how the Republicans in this town behave. You see the Democrats tax and spend. You see the Republicans in Washington, D.C. cut taxes and borrow. Governors don't get to print money and there's no appetite to borrow money except in the worst of a crisis. So you really do have to find a way to shrink your government. 

I'm proud of the growth and attractiveness of Arizona. I think we have 400,000 additional people in Arizona versus the day that I came into office. But our state government is smaller. We were actually able to shrink the footprint of our state government, the number of people inside the state government, the number of buildings, and real estate holdings of the state government. 

If you look at governors around the country who take this winning game plan and execute it, there's a model that could be used in Washington, D.C. But here no one really seems to want to persuade on why we need to tighten the belt. I did take a hit that first year to balance the budget. There is no constitutional obligation to balance the budget. I just came from the private sector and I had lived through several downturns before, and I knew each time I navigated through a downturn as a CEO, I wished I would have acted faster with more of a sense of urgency and rightsizing the business. So I didn't want to lose those lessons. And the largest responsibility I had in my life to date at age 50. So I said to the legislators who said, "We don't really have to balance the budget. Nothing's going to happen" that I wanted them to blame me for it, that I ran on it, I wanted to do it. I thought it was possible and the economy was going to get better and we could begin to invest again next year. And if the economy didn't get better, we'd be happy we acted today because we wouldn't be exaggerating problems for tomorrow.

Mangu-Ward: What was the cut or elimination or reorganization that you enjoyed the most during that period? 

Ducey: