Taxpayer Bill of Rights
Encyclopedia
The Taxpayer Bill of Rights (abbreviated TABOR) is a concept advocated by conservative
and free market libertarian
groups, primarily in the United States
, as a way of limiting the growth of government
. It is not a charter of rights
but a provision requiring that increases in overall tax revenue
be tied to inflation and population increases unless larger increases are approved by referendum
.
. In 1992, the voters of the state approved a measure which amended Article X of the Colorado Constitution that restricts revenues for all levels of government (state, local, and schools). Under TABOR, state and local governments cannot raise tax rates without voter approval and cannot spend revenues collected under existing tax rates if revenues grow faster than the rate of inflation and population growth, without voter approval. Revenue in excess of the TABOR limit, commonly referred to as the “TABOR surplus,” must be refunded to taxpayers, unless voters approve a revenue change as an offset in a referendum. Under TABOR, the state has returned more than $2 billion to taxpayers.
The allowance for spending to grow at the rate of inflation plus population growth means that inflation-adjusted per capita
spending generally did not decrease. However, spending growth could be interrupted due to an economic recession, in which case inflation-adjusted per capita spending did decrease -- and TABOR did not permit inflation-adjusted per capita spending to return to its pre-recession level. This was known as the "ratchet-down effect," and it occurred in FY2001-02 and FY2002-03. The ratchet-down effect was desirable to those who believed government was consuming too large a fraction of Colorado's gross state product
(GSP), and undesirable to those who believed government was consuming too small a fraction of Colorado's GSP.
In November 2005, Coloradans approved Referendum C, a ballot measure that loosened many of TABOR's restrictions. This measure allows the state to retain and spend money from existing revenue sources above the TABOR limit each year beginning in FY 2005-06. The state may spend all revenue subject to TABOR for five years through FY 2009-10. Beginning in FY 2010-11, the state may spend revenue above the TABOR limit up to a capped amount known as the "Referendum C cap. The Referendum C cap grows from the prior year's cap instead of the prior year's spending by inflation plus population growth. In effect, Referendum C eliminated the ratchet-down effect.
Any retained Referendum C revenue (revenue above the allowable TABOR limit but below the Referendum C cap) is statutorily required to be spent on health care, education, firefighter and police retirement plans and strategic transportation projects. Colorado Legislative Council Staff reported in 2009 that the state would have faced a significant budget shortfall had Referendum C not passed. Therefore, in many instances the Referendum C money that has been spent is not new money to programs, rather it maintained the programs and prevented them from undergoing cuts. It is money the programs may not have received without Referendum C, but it is not additional money when compared with prior years. However, the report also admits that it is impossible to enumerate this impact because it would require knowledge of what budgetary actions the state would have taken had Referendum C failed. Referendum C and other attempts to mitigate the effects of TABOR are referred to as "de-Brucing" after Douglas Bruce
, the author of the amendment.
as an example of the positive effects of tax decreases. They cite the fact that Colorado's economic growth in the dozen or so years since this system was implemented has been well in excess of that of the U.S. as a whole. They also say that deciding tax increases in referendums is more democratic, as legislators may be beholden to Lobby groups, special interests and lobbyists. Counter-arguments to this by opponents are seen as elitist, and supporters claim that the voters are the best judges of how to spend what is, what they portray as their own money.
One prominent advocacy group in favor of TABOR is Americans for Prosperity
. Many of their twenty state chapters are currently working on plans to implement TABOR in their respective states. In Florida, AFP lobbied the Taxation and Budget Reform Committee to place a TABOR on the November '08 ballot. And in Texas, AFP spearheaded the Taxpayer Protection Act concept of giving taxpayers greater control over how much government taxpayers want and are willing to pay for. It was also on the '08 Republican Primary Ballot as a nonbinding initiative.
Many advocates of a more libertarian
bent, such as Americans for Limited Government
, claim that reduced taxation is a noble goal for its own sake, leading to increases in financial freedom and economic prosperity. Others note that Colorado has continued growth as well as larger tax revenues concurrent with the TABOR act.
Advocates claim that the assertion that Colorado ranks 47th in school funding is misleading. The figure, which comes from the U.S. Census Bureau's report titled Public School Finances 2004, measures spending as a percentage of personal income. Colorado appears to be low in these rankings because of the high earning power of its taxpaying residents. Using the same set of figures, a poorer state like New Mexico ranks 7th, though it actually spends fewer dollars per pupil than Colorado.
Measuring all K-12 education expenditures (including construction costs and debt repayment) for 2003–2004, data from the National Center for Education Statistics (NCES) place Colorado at 28th in the nation ($9,073). Strictly measuring operational costs for the same year, Colorado ranks anywhere from 23rd ($8,263 - National Education Association) to 33rd ($7,478 - NCES) in "current" per-pupil spending.
The proportion of state spending on K-12 education is at an all-time high. In 1992, the year before TABOR took effect, the state of Colorado paid 45 percent of the per-pupil funding for public schools. In 2006, the state's share had grown to 62%. From 2000-01 to 2005-06, Colorado's overall per-pupil contribution in state dollars to K-12 education (including all education funds, not just per-pupil funding under the School Finance Act) had increased by 28% — or by 16% after adjusting for inflation.
Opponents also argue that Colorado's economic growth has largely been despite - not because of - this system, and is a result of changing societal desires for open spaces, outdoor sports opportunities, and other "quality of life" issues that are now imperiled by Colorado's inability to provide expanding governmental services. They point out that almost 90% of state tax revenues are now already earmarked for various purposes, handicapping the state legislature
and giving it very little flexibility.
They also add that the process has not been as "democratic
" as its advocates purport, citing the off-year voting and complex wording that may skew results. Some opponents claim that complicated tax decisions are best decided by deliberation based on well-informed argument and informed consent, such as presumably occurs in legislatures, rather than the simplistic and emotionally-charged appeals that tend to dominate referendums.
groups financially backed by New York real estate developer Howie Rich campaigned for laws similar to TABOR in eight states.
Informed observers feel that such advocates have the greatest likelihood of success in jurisdictions which have initiative and referendum and can be put on the ballot directly by voters, at least in the short term, as legislators are very unlikely to be willing to give up such control over the power of the purse
unless voters overwhelmingly demand it. TABOR advocates were handed a setback when a similar proposition, on the ballot on the same day as the California gubernatorial recall of 2003, was overwhelmingly defeated on the same day that a Democratic
governor
was being recalled by a large margin.
It appears far more likely, at least in the short term, that measures similar to the "Taxpayer Bill of Rights" will be adopted on the county and municipal level than on a statewide basis beyond Colorado; one municipality adopting the plan in recent years has been Spring Hill, Tennessee
. After the November 2005 setback for proponents in Colorado, advocates in many regions are now downplaying the name "Taxpayer Bill of Rights" in favor of other terms such as "Spending Limitation Movement". Organizations dedicated to shrinking government are pushing for the adoption of TABORs in other states. Currently, Colorado is the only state with TABOR. In 2005, TABOR proposals were introduced in about half of the states. A TABOR referendum on the ballot in Maine
as an initiative effort led by Mary Adams
was defeated in November 2006. Similar referendums were also defeated in Nebraska and Oregon that year. Similar initiatives in Maine and Washington were defeated in 2009.
Conservatism
Conservatism is a political and social philosophy that promotes the maintenance of traditional institutions and supports, at the most, minimal and gradual change in society. Some conservatives seek to preserve things as they are, emphasizing stability and continuity, while others oppose modernism...
and free market libertarian
Libertarianism
Libertarianism, in the strictest sense, is the political philosophy that holds individual liberty as the basic moral principle of society. In the broadest sense, it is any political philosophy which approximates this view...
groups, primarily in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, as a way of limiting the growth of government
Government
Government refers to the legislators, administrators, and arbitrators in the administrative bureaucracy who control a state at a given time, and to the system of government by which they are organized...
. It is not a charter of rights
Bill of rights
A bill of rights is a list of the most important rights of the citizens of a country. The purpose of these bills is to protect those rights against infringement. The term "bill of rights" originates from England, where it referred to the Bill of Rights 1689. Bills of rights may be entrenched or...
but a provision requiring that increases in overall tax revenue
Tax revenue
Tax revenue is the income that is gained by governments through taxation.Just as there are different types of tax, the form in which tax revenue is collected also differs; furthermore, the agency that collects the tax may not be part of central government, but may be an alternative third-party...
be tied to inflation and population increases unless larger increases are approved by referendum
Referendum
A referendum is a direct vote in which an entire electorate is asked to either accept or reject a particular proposal. This may result in the adoption of a new constitution, a constitutional amendment, a law, the recall of an elected official or simply a specific government policy. It is a form of...
.
The Colorado example
The most well-known example of TABOR legislation is in the state of ColoradoColorado
Colorado is a U.S. state that encompasses much of the Rocky Mountains as well as the northeastern portion of the Colorado Plateau and the western edge of the Great Plains...
. In 1992, the voters of the state approved a measure which amended Article X of the Colorado Constitution that restricts revenues for all levels of government (state, local, and schools). Under TABOR, state and local governments cannot raise tax rates without voter approval and cannot spend revenues collected under existing tax rates if revenues grow faster than the rate of inflation and population growth, without voter approval. Revenue in excess of the TABOR limit, commonly referred to as the “TABOR surplus,” must be refunded to taxpayers, unless voters approve a revenue change as an offset in a referendum. Under TABOR, the state has returned more than $2 billion to taxpayers.
The allowance for spending to grow at the rate of inflation plus population growth means that inflation-adjusted per capita
Per capita
Per capita is a Latin prepositional phrase: per and capita . The phrase thus means "by heads" or "for each head", i.e. per individual or per person...
spending generally did not decrease. However, spending growth could be interrupted due to an economic recession, in which case inflation-adjusted per capita spending did decrease -- and TABOR did not permit inflation-adjusted per capita spending to return to its pre-recession level. This was known as the "ratchet-down effect," and it occurred in FY2001-02 and FY2002-03. The ratchet-down effect was desirable to those who believed government was consuming too large a fraction of Colorado's gross state product
Gross state product
Gross state product is a measurement of the economic output of a state or province...
(GSP), and undesirable to those who believed government was consuming too small a fraction of Colorado's GSP.
In November 2005, Coloradans approved Referendum C, a ballot measure that loosened many of TABOR's restrictions. This measure allows the state to retain and spend money from existing revenue sources above the TABOR limit each year beginning in FY 2005-06. The state may spend all revenue subject to TABOR for five years through FY 2009-10. Beginning in FY 2010-11, the state may spend revenue above the TABOR limit up to a capped amount known as the "Referendum C cap. The Referendum C cap grows from the prior year's cap instead of the prior year's spending by inflation plus population growth. In effect, Referendum C eliminated the ratchet-down effect.
Any retained Referendum C revenue (revenue above the allowable TABOR limit but below the Referendum C cap) is statutorily required to be spent on health care, education, firefighter and police retirement plans and strategic transportation projects. Colorado Legislative Council Staff reported in 2009 that the state would have faced a significant budget shortfall had Referendum C not passed. Therefore, in many instances the Referendum C money that has been spent is not new money to programs, rather it maintained the programs and prevented them from undergoing cuts. It is money the programs may not have received without Referendum C, but it is not additional money when compared with prior years. However, the report also admits that it is impossible to enumerate this impact because it would require knowledge of what budgetary actions the state would have taken had Referendum C failed. Referendum C and other attempts to mitigate the effects of TABOR are referred to as "de-Brucing" after Douglas Bruce
Douglas Bruce
Douglas Edward Bruce is a conservative activist and former legislator in the U.S. state of Colorado, best known as the author of Colorado's Taxpayer Bill of Rights ....
, the author of the amendment.
Advocates
Advocates like Douglas Bruce see the experience of ColoradoColorado
Colorado is a U.S. state that encompasses much of the Rocky Mountains as well as the northeastern portion of the Colorado Plateau and the western edge of the Great Plains...
as an example of the positive effects of tax decreases. They cite the fact that Colorado's economic growth in the dozen or so years since this system was implemented has been well in excess of that of the U.S. as a whole. They also say that deciding tax increases in referendums is more democratic, as legislators may be beholden to Lobby groups, special interests and lobbyists. Counter-arguments to this by opponents are seen as elitist, and supporters claim that the voters are the best judges of how to spend what is, what they portray as their own money.
One prominent advocacy group in favor of TABOR is Americans for Prosperity
Americans for Prosperity
Americans for Prosperity is a Washington, D.C.–based political advocacy group. According to their literature, they promote economic policy that supports business, and restrains regulation by government...
. Many of their twenty state chapters are currently working on plans to implement TABOR in their respective states. In Florida, AFP lobbied the Taxation and Budget Reform Committee to place a TABOR on the November '08 ballot. And in Texas, AFP spearheaded the Taxpayer Protection Act concept of giving taxpayers greater control over how much government taxpayers want and are willing to pay for. It was also on the '08 Republican Primary Ballot as a nonbinding initiative.
Many advocates of a more libertarian
Libertarianism
Libertarianism, in the strictest sense, is the political philosophy that holds individual liberty as the basic moral principle of society. In the broadest sense, it is any political philosophy which approximates this view...
bent, such as Americans for Limited Government
Americans for Limited Government
Americans for Limited Government describes itself as a non-partisan, nationwide network committed to advancing free-market reforms, private property rights and core American liberties...
, claim that reduced taxation is a noble goal for its own sake, leading to increases in financial freedom and economic prosperity. Others note that Colorado has continued growth as well as larger tax revenues concurrent with the TABOR act.
Advocates claim that the assertion that Colorado ranks 47th in school funding is misleading. The figure, which comes from the U.S. Census Bureau's report titled Public School Finances 2004, measures spending as a percentage of personal income. Colorado appears to be low in these rankings because of the high earning power of its taxpaying residents. Using the same set of figures, a poorer state like New Mexico ranks 7th, though it actually spends fewer dollars per pupil than Colorado.
Measuring all K-12 education expenditures (including construction costs and debt repayment) for 2003–2004, data from the National Center for Education Statistics (NCES) place Colorado at 28th in the nation ($9,073). Strictly measuring operational costs for the same year, Colorado ranks anywhere from 23rd ($8,263 - National Education Association) to 33rd ($7,478 - NCES) in "current" per-pupil spending.
The proportion of state spending on K-12 education is at an all-time high. In 1992, the year before TABOR took effect, the state of Colorado paid 45 percent of the per-pupil funding for public schools. In 2006, the state's share had grown to 62%. From 2000-01 to 2005-06, Colorado's overall per-pupil contribution in state dollars to K-12 education (including all education funds, not just per-pupil funding under the School Finance Act) had increased by 28% — or by 16% after adjusting for inflation.
Opponents
Opponents argue that the lack of tax revenue has hurt Colorado in many ways. For instance, Colorado ranks 48th in the nation for higher education funding (per personal income level), which is the lowest in 40 years, representing a drop from 34th in 1992. In another example, Colorado now ranks 44th in what it spends to repair its roads. Opponents claim that it is because of this that the percentage of Colorado’s roads in "poor" condition stands at 73 percent, with quality declining dramatically since TABOR was enacted.Opponents also argue that Colorado's economic growth has largely been despite - not because of - this system, and is a result of changing societal desires for open spaces, outdoor sports opportunities, and other "quality of life" issues that are now imperiled by Colorado's inability to provide expanding governmental services. They point out that almost 90% of state tax revenues are now already earmarked for various purposes, handicapping the state legislature
Legislature
A legislature is a kind of deliberative assembly with the power to pass, amend, and repeal laws. The law created by a legislature is called legislation or statutory law. In addition to enacting laws, legislatures usually have exclusive authority to raise or lower taxes and adopt the budget and...
and giving it very little flexibility.
They also add that the process has not been as "democratic
Democracy
Democracy is generally defined as a form of government in which all adult citizens have an equal say in the decisions that affect their lives. Ideally, this includes equal participation in the proposal, development and passage of legislation into law...
" as its advocates purport, citing the off-year voting and complex wording that may skew results. Some opponents claim that complicated tax decisions are best decided by deliberation based on well-informed argument and informed consent, such as presumably occurs in legislatures, rather than the simplistic and emotionally-charged appeals that tend to dominate referendums.
TABOR in other states
Reforms similar to Colorado's have been put forward in several states. In 2006, two LibertarianLibertarianism
Libertarianism, in the strictest sense, is the political philosophy that holds individual liberty as the basic moral principle of society. In the broadest sense, it is any political philosophy which approximates this view...
groups financially backed by New York real estate developer Howie Rich campaigned for laws similar to TABOR in eight states.
Informed observers feel that such advocates have the greatest likelihood of success in jurisdictions which have initiative and referendum and can be put on the ballot directly by voters, at least in the short term, as legislators are very unlikely to be willing to give up such control over the power of the purse
Power of the purse
The power of the purse is the ability of one group to manipulate and control the actions of another group by withholding funding, or putting stipulations on the use of funds. The power of the purse can be used to save their money and positively or negatively The power of the purse is the ability...
unless voters overwhelmingly demand it. TABOR advocates were handed a setback when a similar proposition, on the ballot on the same day as the California gubernatorial recall of 2003, was overwhelmingly defeated on the same day that a Democratic
Democratic Party (United States)
The Democratic Party is one of two major contemporary political parties in the United States, along with the Republican Party. The party's socially liberal and progressive platform is largely considered center-left in the U.S. political spectrum. The party has the lengthiest record of continuous...
governor
Governor of California
The Governor of California is the chief executive of the California state government, whose responsibilities include making annual State of the State addresses to the California State Legislature, submitting the budget, and ensuring that state laws are enforced...
was being recalled by a large margin.
It appears far more likely, at least in the short term, that measures similar to the "Taxpayer Bill of Rights" will be adopted on the county and municipal level than on a statewide basis beyond Colorado; one municipality adopting the plan in recent years has been Spring Hill, Tennessee
Spring Hill, Tennessee
Spring Hill is a city in Maury and Williamson counties in the U.S. state of Tennessee, located approximately south of Nashville. The population was 7,715 at the 2000 census...
. After the November 2005 setback for proponents in Colorado, advocates in many regions are now downplaying the name "Taxpayer Bill of Rights" in favor of other terms such as "Spending Limitation Movement". Organizations dedicated to shrinking government are pushing for the adoption of TABORs in other states. Currently, Colorado is the only state with TABOR. In 2005, TABOR proposals were introduced in about half of the states. A TABOR referendum on the ballot in Maine
Maine
Maine is a state in the New England region of the northeastern United States, bordered by the Atlantic Ocean to the east and south, New Hampshire to the west, and the Canadian provinces of Quebec to the northwest and New Brunswick to the northeast. Maine is both the northernmost and easternmost...
as an initiative effort led by Mary Adams
Mary Adams (activist)
Mary G. Adams is a tax activist who successfully led the effort to repeal Maine's statewide property tax in the mid-1970s. She recently led a failed 2006 referendum effort to enact a Taxpayer Bill of Rights in Maine....
was defeated in November 2006. Similar referendums were also defeated in Nebraska and Oregon that year. Similar initiatives in Maine and Washington were defeated in 2009.