September 3, 2003

Colorado TABOR: The Results Are In

The Independence Institute, a Colorado think tank, has recently released the results of a study of the impact of the Taxpayers Bill of Rights a decade after it was adopted by voters in that state. Here is the summary:

Pre-TABOR, government jobs grew slightly more than business or total employment. After TABOR, business job growth nearly doubled that of government job growth.

The TABOR surplus rebate mechanism returned to taxpayers some $3.25 billion over five years, fiscal 1997 to 2001, amounting to about $800 per capita-$3,200 for an average family of four. TABOR is a success. It passed its own test to reasonably contain growth of Colorado government, taxing and spending.

Here's a link to the whole report. And here is its conclusion:

For the first three years after passage of the TABOR amendment, the state did not exceed the revenue limitation so no surpluses were available, therefore no tax rebates. “In Fiscal Years 1996-97 through 2000-01, state revenues exceeded the TABOR limitation by $139.0 million, $563.2 million, $679.6 million, $941.1 million and $927.2 million, respectively.” This totals $3.25 billion returned to taxpayers, or a rough per capita estimate of a little over $800 - $3,200 for a family of four, during those five years.

Unfortunately, the legislature and the governor resorted to accounting gimmicks on the TABOR refund. As TABOR began to produce a surplus in 1997, to be distributed back to Colorado taxpayers, the General Assembly passed and Governor Romer signed HB98-1414, to postpone “this year’s excess.”

Apparently the legislature expected to use the next year’s excess to make the required refund. Using next year’s revenue to pay for this year’s refund worked fine until 2002-2003’s serious revenue downturn, when a refund was due, but there was no excess revenue. The 2002-2003 fiscal squeeze was a direct result of the 1998 legislature’s irresponsible decision to use an accounting trick so that spending could be increased. The 2003 legislature would have had a much easier budget session if the 1998 legislature had acted responsibly.

The TABOR Amendment of 1992 has worked well to achieve its stated intention to “slow government growth.” What TABOR really did was stop excess government growth. TABOR did not stop reasonable government growth; as we have seen, government continued to grow at the rate of population-plus-inflation. TABOR is simply undoing the spending spree of the 1980’s, not shrinking government to unrealistic levels. TABOR encourages elected officials to better set priorities and resist heavy special interest lobbying pressures. TABOR frees up capital in the private sector to create more wealth-creating jobs that boost productivity and output. Here are the TABOR results:

• Private sector job creation more than doubled while government job growth held steady.

• An average Colorado family paid about $16,700 less in state taxes during TABOR’s first decade.

• Per capita state taxes and spending growth had been growing far faster than inflation-plus-population. That extreme growth rate was halted.

• State government growth was very much in line with population-plus-inflation.

TABOR has succeeded. TABOR did not wreck the state economy or the state government, as its opponents had predicted. Instead, private-sector job creation and the state government were able to grow at a reasonable pace. Colorado families were able to retain much more of the fruits of their labor.

UPDATE: Independence Institute President Jon Caldara comments on the Taxpayers Bill of Rights:

The Taxpayer's Bill of Rights enjoys a love-hate relationship in Colorado. Taxpayers love it, and those who like to spend other people's money hate it.

You see, there is a well-funded effort, made to look like "consensus building," to dismantle TABOR. That's why you are going to hear a lot more TABOR- bashing in the next year or so.

And they're going insult you by saying that you didn't really understand what you were voting on back in 1992.

But, in fact TABOR did exactly what it promised to do. It limited the growth of government to population and inflation. Over the last decade inflation and population grew by 63 percent in Colorado. The size of state government grew by about 64 percent.

During the overheated late 1990s, the TABOR rebate mechanism returned $3.25 billion in state tax overpayments; that's about $800 for every man, woman and child, or $3,200 per family of four.

And if the economy heats up again, TABOR has a built-in mechanism that allows government to keep all the excess tax revenue it wants, even if there is budget "ratcheting." All they have to do is ask you if they can keep it. That's it.

TABOR-haters were disappointed that when they asked you to keep surplus tax money before, you sometimes said no. So they don't want to you to have that choice anymore.

They are afraid you might say no again. And they don't think no should mean no. They want to legalize fiscal date rape.

So why are we in a budget squeeze? In 2000 voters passed Amendment 23, which mandated increases in K-12 educational spending, even in slow economic times when there aren't any tax surpluses, squeezing out all other programs like higher education, corrections and health care. It's no wonder why the state budget is in trouble.

And TABOR had nothing to do with it.