Taxing Matters

In 2005, the people of Colorado made a counterintuitive move: They approved a referendum that basically guaranteed higher state taxes.

With the support of 52 percent of the population, Coloradans suspended the Taxpayer Bill of Rights (TABOR), a budget-slashing 1992 law that dramatically lowered taxes but severely restricted government's ability to function. A favorite of libertarians nationwide, TABOR left Colorado mired in the early 2000s recession and constrained spending on infrastructure and social services. Funding for higher education dropped and roads were left in disrepair, dissuading businesses from investing in the state. As a result, Colorado's average job growth between 2001 and early 2006 was a minuscule 0.2 percent; the other Rocky Mountain states averaged 8.3 percent. These shocking numbers, coupled with the defeats of TABOR initiatives in Maine, Oregon, and Nebraska the following year, should have completely discredited the program nationwide.

Alas, not so. This year, two TABOR initiatives have made it onto ballots in Maine -- once again -- and Washington state, despite vigorous progressive opposition. But with anti-tax agitator Grover Norquist barnstorming around Maine and recession-minded voters looking warily at their wallets, the initiatives seem to stand a good chance of being passed into law, just when their local governments can least afford it.

TABOR bills are designed to restrict government spending by capping taxes at the previous year's levels and allowing them to grow only in relation to population plus inflation. This idea can be problematic in boom years, but critics fear it would be disastrous now, when state and local budgets have already been cut to the marrow. If TABOR passes in Maine or Washington, the states would have to cap their budget at the 2010 revenue baseline. If the recession continues eating into revenues, the TABOR cap would only continue dropping, forcing governments to cut more programs. If the economy improves, Maine and Washington would still be trapped by the previous year's spending limit -- in this case, the trough of the worst recession in a generation. Essentially, both states -- along with every county and city within them -- would be locked into recession-era spending.

"TABOR would make it impossible for either state to ever recover any of the public services that were cut during this recession," says Iris J. Lav, senior adviser for state fiscal policy at the Center on Budget and Policy Priorities. "In a recession, revenues drop. When revenues drop under TABOR, the inflation and population allowances are applied to those reduced revenues; you don't get to go back to your previous base."

The permanent loss of state spending sacrificed to the recession would be staggering. Maine's budget has already experienced severe cuts -- including $27 million excised from public education -- and there's worse on the way. Washington doesn't look any better. Funding from the American Recovery and Reinvestment Act has kept state services like Medicaid and higher education funding from completely deteriorating. But this is only a stop-gap measure, as the stimulus will expire by 2012. To make matters worse, TABOR laws do not count federal expenditures as part of the revenue cap, meaning stimulus-supported programs will have to be dropped when the money runs out, because state budgets won't be able to grow to accommodate them.

"We just went through the largest budget cutting that we've ever experienced," said Remy Trupin, executive director of Washington State Budget & Policy Center. "Immediately, I-1033 [the Washington initiative] would knock another huge hole into our budgets. There isn't a lot left to be cut. We're really at the bone in terms of public structures in areas we care about, particularly for low-income Washingtonians. The next cut will probably eliminate entire programs."

The prospect of permanent recession-level spending and bare-bones social programs has drawn a diverse array of forces to the anti-TABOR banner. In Washington, nine Chambers of Commerce joined a host of labor unions on the opposition campaign's endorsement list, granting I-1033 the uncommon distinction of uniting labor and capital against it. Democrats are opposed too, of course. But even a number of prominent state Republicans have broken party ranks and come out against the initiative, including former Sen. Slade Gorton.

Despite what sounds like strong opposition, I-1033 has shown resiliency. It is a homegrown affair, championed by Tim Eyman, a perennial anti-tax crusader. During his 10 years in Washington politics, Eyman has introduced 16 tax-reform initiatives. Voters approved every one that made it to the ballot and cut taxes, granting him a patina of invulnerability on the issue. Indeed, despite recent polls showing approval for I-1033 has fallen from 6o percent to the low 40s, the Seattle Post-Intelligencer worries, "[Eyman's] initiatives have tended to run better when votes are counted than in pre-election polls."

Meanwhile, Maine's Question 4 TABOR fight is drawn along predictable ideological lines. And unlike I-1033, it has significant ties to out-of-state groups. Maine Leads, the group behind the original ballot petitions for Question 4, recently revealed its major sponsors: the National Taxpayers Union, National Tax Limitation Committee, and the Sam Adams Alliance. None of them are Maine-based. Meanwhile, Norquist has depicted the Maine fight as the opening salvo in a nationwide campaign.

"I think the Maine TABOR will sort of be a spark to other states," Norquist said at a $100-a-plate luncheon held at the Maine Heritage Policy Center. "I'm talking to taxpayer activists and citizens' groups, all of whom are looking to see that if Maine, a moderate Northeastern state says, 'Yes, let's take a look at this,' it then becomes a stronger sell in Arizona and Washington and Oregon and Florida."

Despite Norquist's grandiose ambitions, it is unlikely that TABOR will become a nationwide phenomenon. Colorado's cautionary tale still serves as a stark reminder of the dangers that lie in wait for voters enraptured only with small government, no matter the cost. Opposition groups in both states have placed Colorado at the center of their message, trumpeting the profound disruption of living standards caused by TABOR, and specifically highlighting the state's devastating educational cutbacks. Constituents in Washington and Maine have been responsive to the message, according to polls, which show the TABORs' commanding leads slipping.

If these TABOR efforts fail, progressives can declare victory for now. But proponents will inevitably try again in another off-election year, likely when voter turnout is lower and more reliably conservative. If Norquist, Eyman, and their allies succeed this time, another state would suffer fiscal disaster. But we don't really need another cautionary tale. One Colorado is enough.

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