Chipping Away at Tabor’s Success

Colorado’s Tax Payer’s Bill of Rights (Tabor) is the strongest tax and expenditure limit in the country. It fixes per capita spending, adjusted for inflation, at the 1992 level. The only similar state law is California’s Gann Limit, but this rule has been amended so many times by both legislators and voters that it has become meaningless, leaving the state at present near financial ruin.

Tabor is popular among many Colorado residents because all state and local tax increases must be approved by voters. However, new proposals threaten to move the state’s budget further toward California’s by cutting taxes when the state is already struggling to cover its expenditures. The New York Times reports:

The combined results would blow a $1.7 billion hole, or more, in a state budget that is already facing a $1.3 billion shortfall, according to an analysis by the Bell Policy Center, a research and advocacy group in Colorado that has opposed Tabor-driven spending cuts in social programs.

Dan Maes, who is seeking a nomination to run for governor, is among the Republicans in the Colorado state legislature who proposed the tax cuts. Creating budget shortfalls is poor policy, despite its potential for popularity among voters. Any tax cuts in a state without budget surpluses should be met with cuts in expenditure as well, which this proposal is not. Democratic Governor Bill Ritter explains in the article:

“The cynical game the proponents are playing with our future would quite literally destroy the safety net and wipe out any hope of creating a better future for our children,” said Mr. Ritter, who has said he decided not to run again so he can spend more time with his family and focus on the state’s battered budget with fewer political distractions.

Tax and expenditure limits like Tabor are important steps toward maintaining fiscal health and stability at the state level, but perhaps even more important is that states, like their citizens, do not spend beyond their means. Too often, the budget debate is split between Democrats who will not support budget cuts and Republicans who will not support tax increases. Basic arithmetic demonstrates that these conflicting policies cannot coexist in the long run.

Colorado’s fiscal policy of relatively low taxes and stable expenditures has helped the state’s GDP grow faster than the national average since Tabor’s implementation. Even more important to the state’s future, however, is a governor, Republican or Democrat, who limits debt and and emphasizes balanced budgets.