Colorado Offers the Gold Standard for Fiscal Restraint

T oday marks the 30th anniversary of Colorado’s Taxpayer’s Bill of Rights (TABOR), one of the best-known state tax and expenditure limits (TELs) in America. While it has returned billions of dollars to, and provided important protection for, hardworking Colorado taxpayers over the past three decades, TABOR continues to be subject to unrelenting political attacks from its tax-and-spend opponents, as well as appalling judicial activism from Colorado courts.

TABOR is a state constitutional amendment that limits the amount of revenue Colorado lawmakers can retain and spend to a reasonable formula of population plus inflation growth. If the state government collects more tax revenue than TABOR allows, the money is returned to taxpayers as a refund. Just this year, Colorado taxpayers will receive nearly $4 billion in TABOR refund checks.

If any government in Colorado intends to spend surplus revenue, increase taxes or fees, or increase debt, it must submit the proposed measure to the ballot and win the approval of a majority of voters. Ballot measures must clarify how the funds will be raised and allocated. This institutionalized transparency explains in large part TABOR’s success. Taxes can still be increased, but it takes a vote of the people to do so.

For decades, academic researchers such as the late Milton Friedman have promoted the benefits of having an institutional constraint, like TABOR, on the growth of government. Following the low-tax-plus-limited-government formula, Colorado developed into one of the most competitive business climates in the nation in the years following TABOR’s adoption. During the past three decades, Colorado has been one of the most competitive and fastest-growing economies in the nation.

At the time of its approval, many critics condemned TABOR claiming it would cause businesses to flee the state and the economy to collapse. (Some things never change.) Every year, progressives launch similar attacks and occasionally introduce ballot measures to rescind or water down TABOR. This year, the left-wing Denver Post is going after TABOR again, urging legislators to “scrap the antiquated TABOR refund mechanism and find a more equitable way to treat Colorado taxpayers.”

But it is likely because of the protection of TABOR that businesses haven’t emigrated from Colorado at the same rate as they’ve fled tax-and-spend states like California, Illinois, and New York. As former Colorado representative Penn Pfiffner, chairman of the TABOR Foundation’s board of directors, put it:

The Colorado economy has been robust over the past 30 years and almost always stronger relative to the national average. That would be a natural attractant to big-government proponents and progressives. Fortunately, Colorado has the Taxpayer’s Bill of Rights, which has acted to limit how fast the state and local governments grow.

TABOR has seen no shortage of progressive attacks, which serves as an acknowledgment of the danger it presents to those who would like no constraints on government’s ability to grow. Though all states except Bernie Sanders’s Vermont have some sort of balanced-budget requirement in state laws or their constitutions, most don’t have robust protection such as that which TABOR offers.

Taxing and spending may not be out of control in Colorado, but it takes only one future generation of policy-makers to change that. In Colorado, such a generation of big spenders has been held at bay, so far, by the resiliency of the Taxpayer’s Bill of Rights. As state representative Patrick Neville put it, “TABOR is the only thing keeping us from becoming East California.”

Even in the face of this tremendous economic-success story, the tax-and-spend crowd have spent a tremendous amount of resources trying to demonize TABOR, often attempting to find work-arounds or suing to have TABOR declared unconstitutional. Why? In short, because it is an effective limit on the growth of government, and it restricts the wild spending increases that fund their constituencies — who generally favor big government.

Despite these attacks, opponents readily claim TABOR’s benefits when it earns them political capital. After years of working to undermine TABOR, progressive lawmakers were quick to cheer on the estimated $3.7 billion in surplus revenue “they” gave back to Coloradans in 2022 through rebate checks.

TABOR remains the gold standard for state spending control. While the politically motivated attacks against it will undoubtedly continue, it represents a fiscal-policy achievement Coloradans should be proud of and defend. Other states trying to implement meaningful checks and balances on the inexorable government-growth machine, meanwhile, should follow Colorado’s example.

Jonathan Williams is the executive vice president of policy and chief economist at the American Legislative Exchange Council. Follow him on Twitter @taxeconomist. Nick Stark is the director of the Tax and Fiscal Policy Task Force at the American Legislative Exchange Council. Follow him on Twitter @njstark7.