June 11, 2003

Was Tennessee's Tax Revolt Nuked in Oak Ridge?

Frank Cagle explains why the movement to enact an effective tax-and-spending limitation in Tennessee isn't off to a rip-roaring start. The movement suffered a setback in Oak Ridge, "an unlikely place to launch an anti-government and lower taxes movement," says Cagle.

"It's a government town. The people of Oak Ridge have always supported higher taxes for education. It has a world-class school system to go with one of the highest property tax rates in the state. Some of the best organized and some of the most vigorous public debates for a state income tax have been in Oak Ridge."

The small-government conservatives around the state are continuing to fight proposed property tax increases in a half dozen counties. A group called the Tennessee Tax Revolt is organizing e-mails and faxes to county commissioners considering tax increases. There is legislation, yet to be pushed, that would make it harder for the General Assembly to raise taxes. The movement to limit government spending and thus lower taxes will continue. But, if the movement is to have success, it has to learn how politics work.

Picking battles. Learning to compromise. Taking what you can get when you can get it. Winning short-term goals. The status quo has been built up over decades.

Revolutions scare people.

I spoke at the Crossville conference Cagle mentions - a conference that aimed to launch a statewide movement to enact a Taxpayers Bill of Rights similar to the one in Colorado, where citizens must approve tax increases by referendum and government revenues that exceed a cap are returned via tax cuts or rebates.

At the Crossville conference, I delivered a speech based on this white paper, explaining the history of tax-and-spending limitation laws in general and the Colorado Taxpayers Bill of Rights specifically, and showing how Tennessee's budget problems over the last few years were the result of over-spending, not under-taxing. Indeed, if the state had lived with its current constitutional cap on spending growth over the past decade, instead of exceeding it by $1.096 billion during the eight years of the Sundquist administration, there would have been no budget crisis. But that constitutional cap has a loophole that governors and legislators have exploited for years, and all that extra spending has proven to be unsustainable during the economic downturn. Laws like the Taxpayers Bill of Rights prevent profligate spending during the boom years that is unsustainable over the long term - and that reduces the pressure for tax increases and imposition of new taxes.

I left the Crossville conference with high hopes and, indeed, legislation to create a Colorado-style Taxpayers Bill of Rights has been filed in the Tennessee General Assembly, though no effort has been made to push it forward in the legislative process.

I agree with Cagle that the movement is not moving along well at all. And that's a shame. Momentum from last year's defeat of the income tax - and subsequent defeat or retirement of several pro-income tax legislators, replaced by anti-tax conservatives - has been squandered, and a chance to enact a workable tax-and-spending limitation or at least put it on the ballot for voters to approve or reject, has been wasted. That's sad, because the political climate is right for it. After four years of being harangued for higher taxes and told it was their fault the government could not afford its spending binge, Tennessee elected a new governor who has proven that the state can, it turns out, balance its budget without resorting to tax increases or gimmicks, by applying smart fiscal management and spending restraint. The time to codify that approach in the state constitution is now. But the movement is blowing it.

Why? Partly tactics, strategy and political naivete. And partly because some in the movement have a go-for-broke, all-or-nothing mentality - they want the world's toughest tax-and-spending limit and aren't willing to work incrementally and, as Cagle puts it, take what they can get. Rather than get behind a simple Taxpayers Bill of Rights that would be easy to explain to voters, they seek a massive set of reforms to put not only basic caps on taxes and spending into the constitution, but numerous government "accountability" measures that turn the whole thing into a complicated mass that will confuse voters, and give opponents too many targets to shoot at.

What Tennessee needs is a simple Taxpayers Bill of Rights amendment that:

1. Forbids future tax increases, creation of new taxes, or increases in state debt unless approved by voters in a referendum.
2. Caps the rate of state government revenue growth to the rate of economic growth as determined by the formula of baseline spending adjusted for inflation and population growth.
3. Requires excess funds above a defined reserve funds limit be returned via an across-the-board cut in the state's primary tax (currently the sales tax).
4. Allows the legislature to seek approval in a referendum to spend surplus funds on a specific list of projects or programs.
5. Sets the same restrictions on city and/or county governments if approved in a local referendum - with local referendums required within one year of enacting the Taxpayers Bill of Rights.

The bad news is, the movement suffered a setback - okay, a massive failure - in Oak Ridge. The good news is, as Cagle mentions, when tax-and-spending limits are put on the ballot, voters general approve them. And the failure in Oak Ridge may turn out for the good - failure is always a better teacher than success. Maybe, now, the movement will see the wisdom of simplicity.