What States Can Learn from Colorado’s Taxpayer Bill of Rights (TABOR)

Constitutional spending limits are an effective means to control the growth of spending and protect the interests of taxpayers.

Other states can learn a lesson from Colorado. Some will be disappointed this lesson is not about  the legalization of marijuana, but rather Colorado’s Taxpayer’s Bill of Rights or TABOR. In 1992 Colorado voters adopted TABOR, a constitutional amendment that limits government spending to the rate of inflation plus population and requires voters consent to increase spending and taxes. The TABOR amendment is one of the strongest tax and spending limitations among the states.

Several states have some form of a spending or tax limitation either in their code or in the state constitution. Iowa, for instance, does not have a spending limitation in the constitution, but state code mandates that the legislature cannot spend more than 99 percent of revenues. The purpose of a spending limit is to control the growth of government and control future spending. “The main goal of fiscal policy should be to shrink the burden of government spending as a share of economic output,” noted economist Daniel Mitchell.

One weakness with all tax and spending limitation amendments, whether they require a supermajority vote of the Legislature or in TABOR’s case a vote of the people, is that these measures are primarily defensive.  While they add greater protection to taxpayers, they do not guarantee that government spending or taxes will not increase.

Since spending and tax limitations can take various forms, Matthew Mitchell, a senior fellow at the Mercatus Center, contends that the most effective limitations will have the following characteristics:

  • Spending limitation formula is based on the sum of inflation plus population growth.
  • Based upon spending rather than revenue.
  • Require a supermajority rather than a majority to be overridden.
  • Immediately refund revenue collected in excess of the limit
  • Written in the state constitution rather than in code.

John Hood, chairman of the John Locke Foundation, argues that spending limitations “work much better if they are coupled with meaningful tax limits.” Using TABOR as an example, it has served Colorado taxpayers well by not only slowing the growth of government and creating economic growth, but also returning hard earned money back to taxpayers. Analysis demonstrates that since TABOR was enacted in 1992 it has “returned more than $3 billion to the taxpayers of Colorado.”

Critics of spending limitations argue that they will deprive the state from the ability to fully fund government programs, but even TABOR demonstrates that it did not “cut or reduce reasonable government growth,” but rather it slowed the growth of government. “The bottom line is that expenditure limits – if properly designed and enforced – are an effective way of controlling government spending. That doesn’t mean that politicians won’t figure out ways to over-spend, just like locks on doors don’t always stop burglars. But both are better than the alternative of no limits or no locks,” reasons Daniel Mitchell.

Under spending and tax limitations such as TABOR the special interests must compete for government revenues. Today in states across the country, many programs are out shouting over the taxpayer for attention. Whether it is water quality, mental health, education, or other programs all of these are calling for more funding, while the taxpayer’s voice is often drowned out.

Daniel Mitchell describes the ideal world, “Politicians are forced to abide by the rules that apply to every household and business in the state. In other words, they have to prioritize,” Strengthening spending limitations would finally place taxpayers first.