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TABOR Returns!



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Today the National Taxpayers Union, the Independence Institute, and various taxpayer groups in Colorado will be hosting a press conference to herald the return of Colorado’s Taxpayer’s Bill of Rights (TABOR). This is good news for fiscal conservatives. Even though TABOR’s return will have little short-term effect on Colorado fiscal policy, it marks an important first step in rehabilitating the reputation of TABOR. It also brightens the prospects for the enactment of effective fiscal limits across the country.

Prior to TABOR’s enactment in 1992, previous efforts to enact effective fiscal limits met with little success However, TABOR’s low, constitutional revenue limit and provisions mandating immediate rebate of surplus revenues have rightfully earned it the reputation of being America’s most effective fiscal limit. Between 1997 and 2001 Colorado taxpayers received $3.2 billion in tax rebates courtesy of TABOR. During this time, Colorado easily led the country in both tax relief and economic growth. TABOR was seen as a model fiscal limit for other states to follow.

Early efforts by the Left to weaken or undermine TABOR fared poorly. However, in 2000, TABOR opponents changed their strategy. Instead of attacking TABOR directly, they passed Amendment 23, which required substantial annual spending increases on K-12 education. As such, when the 9/11 attacks and a severe drought caused revenues to decline by over $1 billion between 2001 and 2003, Amendment 23 forced the state to increase K-12 education spending by $450 million.

These manufactured fiscal pressures led to the passage of Referendum C in 2005, which suspended TABOR’s revenue limit for five years. This has allowed the legislature to spend, rather than rebate, a total of $3.6 billion above the TABOR limit since that time. Furthermore, the new TABOR limit will start — not at the current revenue level in 2010 — but instead where state revenues peaked in 2008. As such, Colorado residents are projected to miss out on additional $1.4 billion in tax rebates before 2012.

That having been said, TABOR is definitely worth preserving. There is a good chance that Colorado residents will receive tax rebates in fiscal 2013. More importantly, TABOR can once again serve as a model fiscal limit. The passage of Referendum C damaged TABOR’s reputation and efforts to enact similar fiscal limits elsewhere have fared poorly. Fiscal conservatives desperately need an effective, popular fiscal limit. TABOR’s return marks an important first step.

Michael J. New is an assistant professor at the University of Alabama, a fellow at the Witherspoon Institute, and an adjunct scholar at the Cato Institute.



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