The Taxpayer’s Bill of Rights was debated at the Rampart Range Campus of Pike Peak Community College on April 26.TABOR’s author, State Representative Douglas Bruce, spoke in support of TABOR, which was passed by voters as an amendment to the Colorado Constitution in 1992.Wade Buchanan, president of The Bell Policy Center in Denver, took the opposing side.TABOR uses a formula of population growth plus inflation to determine the amount by which state and local tax revenues can grow in any single year. The excess is supposed to be returned to taxpayers in the form of a refund. TABOR also requires that voters approve any tax increases.Douglas Bruce“The desire for tax limitation is universal and timeless. I am pleased to report that TABOR is considered the platinum standard – the ideal – the model for legislation in the area of tax limitation and spending limitation in all of the states,” Bruce said.Bruce cited Robin Hood, William Tell and Lady Godiva, “who rode without clothing through the streets of Canterbury,” as historic tax crusaders. “I hope you are not disappointed that I will leave my coat on,” Bruce said.The essence of TABOR, he said, is the answer to this question: “Who shall decide how much government we can afford?” The answer: “If it’s the people’s money, the people should decide, simply as a matter of consumer power.”Bruce compared funding government to the purchase of a television set. “You decide whether to buy a color TV for $250, $350, $500 or $2,000 depending on the size of the screen. You can’t be forced to pay for a TV you don’t want. You shouldn’t be forced to pay for government programs you don’t want.”Bruce, however, cautioned that TABOR does not tell the government how to spend tax money.”TABOR doesn’t say how much for this program or that program, so if you’ve heard things about how that mean old TABOR amendment is affecting what you [college students] pay for tuition next year, that is simply not the case,” he said.Bruce criticized Referendum C, which was passed by voters in 2005. Referendum C allowed state and local government to retain for five years excess tax revenues that would otherwise have been returned to taxpayers under TABOR.”They [the politicians] persuaded people that the government’s needs came ahead of your own family’s needs because it was some kind of crisis, so you lost your right to vote for five elections in a row,” Bruce said.He also criticized House Joint Resolution 14, which would “do away with any limit on government revenue and spending.””Ordinary laws are the politicians’ way of telling us what to do, but the Constitution is our way of telling them what to do. They love to legislate our activities, but they resent greatly our legislating limits on them,” Bruce said.Wade BuchananBuchanan said the real issue is government, which has rightfully been feared for much of human history.”I want to dig a little deeper into what government represents in Colorado,” Buchanan said. He divided state government spending from the general fund into five categories. For each dollar of income and sales tax revenue spent by the state government:
- Forty cents goes to public schools, with state government providing two-thirds of the funding for public schools.
- A little over 20 cents goes to Medicaid, which is matched by federal government dollars to provide health care services for low income, needy and disabled people in Colorado.
- Ten cents goes to support higher education, including community and state colleges and universities.
- Ten cents goes to support the prison system.
- Ten to 14 cents goes to various human services programs.
“When we talk about how tax dollars are being used, we are talking about our public schools, our colleges and universities, our health care safety net, our prisons and our social safety net,” Buchanan said. “These are important public structures that underpin our prosperity as a county and our economic vitality looking forward.”When people talk about limiting government, they are really talking about limiting schools, colleges, transportation, health care and human service programs, he said.Buchanan cited the G.I. Bill, the Homestead Act, Social Security and rural electrification as examples of successful government programs that used public sector resources to “advance the interests of all of us together. These sorts of investments have meant a great deal for our country and our future prosperity.”Buchanan identified three flaws in TABOR:
- Use of the consumer price index, which has little to do with what the government buys and grows slower than the overall economy, in the formula. “The things that government buys on our behalf tend to grow at about the speed of the overall economy. A limit that forces you to grow at a slower rate is a limit that forces you to cut services,” Buchanan said.
- The ratchet down effect: “When you have an economic downturn and you can’t meet what TABOR would allow you to spend in any one year, you lose that in all future years. So, you can’t get back to where you were before,” Buchanan said.
- Difficulty in saving for rainy days: “Most of the money that other states used for rainy day funds to cushion the (2001-2003) economic downturn was money that automatically had to be returned in rebates under TABOR,” Buchanan said.
The discussion needs to change from tax limitation to a discussion about schools, colleges, universities, highways, transportation system and prisons, he added.”This idea of government as being like a vending machine where you put in a dollar and you get a dollar’s worth of personal, individual benefit back out of the machine is not a productive way of thinking about the fundamental public structures we depend upon to underpin our economy,” Buchanan said.
Bruce’s rebuttalWhen TABOR was adopted, Bruce said, the state had over $2 billion in total state taxes. Fourteen years later, the state has over $5 billion. “That’s an increase of over $3 billion,” Bruce said. “There has been over a hundred percent increase in property tax revenue collected, much faster than inflation and new construction combined. Yet that’s apparently not enough.””In 1992 to 1993, there was $6.3 billion in state spending, and this current fiscal year it’s $16.5 billion. That’s $10 billion more, a 160 percent increase, and that’s not enough,” Bruce said.Bruce also criticized the budget just passed in the Legislature. “The state budget for this next year is $17.5 billion, which is $1.2 billion more than the current budget. That’s $14,160 in state government spending for an average family of four in Colorado. That’s a devastating burden,” he said.”If you want to be pro family, if you want to be pro freedom; allow people to spend their own money to buy their own health care, to buy their own insurance policies, to buy their own educational options and reinvigorate the free market instead of having higher education become a government monopoly.”Bruce derided Buchanan’s use of the term “investment.” “That’s a business term,” he said. “Businesses make investments, and they expect to get their money back with a profit. The government doesn’t do that. The government just spends money and calls it an investment. They take your money, and they spend it on some other program and you never see it again. That’s a distortion of the dictionary meaning of the word.”Bruce also refuted Buchanan’s contention that TABOR makes saving for a rainy day difficult. “Section 5 provides for an emergency reserve. Section 2 defines fiscal year spending as excluding money being saved. There’s no limit on a rainy day fund,” he said. “The inability to have a rainy day fund is the lack of political will by the spineless politicians we have in Denver that I see every day.”Bruce linked Referendum C to a recent attempt to raise the cost of registering vehicles by $30 to $100. “Referendum C was advertised as a five-year timeout. But the fine print said at the end of five years, the spending limit will be the highest level of those five years,” Bruce said. “So, the politicians now have been raising fees like crazy.” The actual cost of registering a car is about $10, he said.”For 25 years, government [spending] has never gone down even when we had the recession, the stock market crash and the drought. They lied to you and they told you spending went down and that’s why they needed Referendum C,” Bruce said. “But they only needed Referendum C to keep the excess money above normal growth. Five years ago they stole over $700 million from a veterans’ trust fund, from the unemployment trust fund, rather than cut their spending spree. Then they raised the fees to replace the money.”
Buchanan’s rebuttalTalking about just the state budget doesn’t tell the whole story, Buchanan said. “The economy keeps growing, so the cost of what government does on our behalf grows as well.”Buchanan said the current size of state government is about 4 percent of the overall state economy, as measured by personal income. Except for the years right after 9/11 and the year after the 1983 energy bust on the Western Slope, 4 percent is the lowest percentage in the last quarter century.”In every other year, we spent more as a percentage of our economy than we are spending right now,” Buchanan said. According to his figures, if Referendum C had not passed, TABOR would have taken the percentage down to 3.3 percent.”What does this mean for the Colorado Springs public schools? What does this mean for PPCC (Pikes Peak Community College) and UC Colorado Springs (University of Colorado)?” Buchanan asked.
Answering questionsA student asked if Gov. Ritter’s challenge to double the number of college graduates and cut the dropout rate in half in a decade is attainable.“I don’t see how,” Buchanan said. “We don’t graduate as many students as most other states do, and we have the very serious challenge of a dropout rate and an achievement gap rate in our public schools. Our relative level of funding being near the bottom has something to do with that.”Do we agree with Ritter’s challenge as a goal? If we don’t have enough money to make that happen, we should talk about whether we should get some money to do it. That’s the discussion we should have. Not this artificial discussion impugning good people who are trying to make good decisions under very difficult circumstances.”
Another member of the audience asked if Bruce would be open to having a taxpayer limitation based on a percentage of the economy instead of inflation plus population.Bruce said there are three components of economic growth: inflation, a population buying more goods and services and productivity. TABOR accounts for the first two, he said.”In real terms, adjusted for inflation, the cost of government per person remains the same. If there’s 5 percent more people and 3 percent inflation, five plus three is eight, so the government can grow 8 percent from the prior year and more if the voters want more,” Bruce said.As for the third component of growth – productivity – Bruce said the government has no incentive to be productive, while the private sector has productivity growth of about 2 percent.”The second law of economics is, if you want more of something, subsidize it. If you want less of something, tax it,” Bruce said.”How many people think the automobile was invented by government? The computer operating system?” Using a percentage of the economy to limit tax revenue would result in taxing innovation, creativity and productivity. “Why should the government benefit if you discover a better mousetrap or build a better computer?”In 2004, Buchanan said, the joint budget committee proposed changing the TABOR formula to a percentage of the economy that same year, and economist Milton Friedman also made such a proposal.Such a change would limit the size of government without downsizing it, Buchanan said. “Bruce doesn’t support that proposal because he wants downsizing to happen,” he said. “He doesn’t believe in public schools – he’s on record for that; he frankly doesn’t believe in public higher education – he’s on record for that; he doesn’t believe in public health care programs.”This whole idea of ‘don’t tax productivity’ is a real bugaboo,” Buchanan said. “It implies that public schools, higher education and a healthy workforce have nothing to do with the fact that those folks are productive.
