Reports of TABOR’s Demise Have Been Greatly Exaggerated

by Alan Cobb

The supporters of Big Government were overjoyed this week when 52 percent of Colorado voters backed an effort to fix a glitch in that state’s hugely successful Taxpayer’s Bill of Rights by allowing the state government to keep an estimated $3.7 billion in scheduled tax relief over the next five years.

This vote, they claimed, was a sign that the voters of Colorado had rejected their Taxpayer’s Bill of Rights, and that taxpayers across the nation should consider the Colorado vote a reason to oppose similar tax-and-spending limits in their own states.

On the contrary, what Coloradoans actually did on Tuesday is vote to make their Taxpayer’s Bill of Rights look more like the improved version that is currently being proposed here in Kansas and in more than 20 other states.

Colorado approved the nation’s first constitutional Taxpayer’s Bill of Rights in 1992. It limits the growth in state spending to the rate of inflation plus population growth, and it requires voter approval before politicians can raise taxes or spend above that limit.

Since Colorado enacted its Taxpayer’s Bill of Rights, millions of that state’s citizens have reaped the benefits. For example, in the eight years before Colorado voters enacted the Taxpayer’s Bill of Rights (TABOR), the state ranked 43rd nationally in median family income growth. Since then, Colorado is 7th. Before TABOR, Colorado ranked 33rd nationally in job growth. Since then, Colorado is 6th. Before TABOR, Colorado ranked 43rd nationally in economic growth per capita, and since then it ranks 7th. TABOR opponents give the credit for Colorado’s recent economic success to the Rocky Mountains, apparently forgetting that the Rockies didn’t just spring up from the Plains in the 1990s.

Still, like all first-of-its-kind products, Colorado’s Taxpayers Bill of Rights wasnt perfect. Think of Colorado’s TABOR as the first version of amazing new computer technology that helps millions of people become wealthier and more productive: overwhelmingly positive, a benefit to millions, but with a minor bug or two. In the case of Colorado’s TABOR, the bug is called the ratchet effect.

Under the ratchet effect, when state revenue levels dip during a recession, the TABOR limit drops with it, and it cant automatically increase to the pre-recession high-water mark. Colorado’s TABOR also doesnt have any effective “Rainy Day” funds that would smooth out budget shortfalls in the lean years. This ratchet effect, when coupled with a competing constitutional amendment unique to Colorado that mandates large automatic increases in education spending, can create a budget squeeze. Fortunately, this ratchet effect bug in Colorado’s TABOR version 1.0 has been corrected in the TABOR version 2.0 that is now being considered in other states.

It would obviously be ridiculous to declare the computer age dead or to call for the abolition of laptops because of a minor bug that can and will be fixed in subsequent versions. The cost of doing that would far outweigh the benefits that will come by improving and promoting a very effective and popular product.

Colorado’s voters did not throw out their Taxpayers Bill of Rights. They used their TABOR-provided right to temporarily suspended scheduled tax relief in an attempt to fix the ratchet effect — essentially trying to make their TABOR look a little more like the improved TABOR version 2.0 that is under consideration in other states.

To paraphrase Mark Twain, reports of the Taxpayer’s Bill of Rights’ death have been greatly exaggerated. The truth is Colorado’s taxpayers just endorsed the improvements that we’ve proposed, which would help bring tax relief, economic freedom and a generally higher standard of living to millions of Americans, including many Kansans.

Alan Cobb is the Director of the Kansas chapter of the Americans for Prosperity Foundation.


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