Monday, February 2, 2004

GUEST COLUMN

Colorado tax 'freeze' ices services

By Wade Buchanan

Even while Wisconsin struggles with severe state budget shortages, State Rep. Frank Lasee has introduced a bill that would implement a so-called "Taxpayer’s Bill of Rights" (AJR 55) modeled after a Colorado constitutional amendment passed in 1992.

As part of a growing coalition of Coloradans — including the Republican state treasurer, community leaders, and state and local government officials from both sides of the political aisle — calling for TABOR reform, our message to our friends in Wisconsin is: Voters, beware.

While most states operate with some tax or spending limits, TABOR is the most restrictive in the nation. Some of the restrictions in TABOR make sense. Colorado voters strongly support its two main ideas: Limiting government growth and requiring voter approval of all tax increases. But the devil is in the details. In truth, TABOR has created a stranglehold on government services — from public health to education to transportation — and will make it much more difficult to recover from the current economic downturn.

Supporters like to credit the law with contributing to the economic boom of the 1990s, even though there is no evidence to support this claim. What has been proven is that the amendment has not allowed essential services, such as education and human services programs, to keep pace with need or growth and has also impaired the state’s ability to invest and innovate for the future.

The "Taxpayers Bill of Rights" has shrunk Colorado’s already-lean programs to anorexic levels. By 2000, Colorado had fallen to 50th  in K-12 spending per $1,000 of personal income. By that same year, the state spent less than most other states on public health care services (as a percent of GSP), was at the bottom in on-time immunization rates, was at the bottom in prenatal care, had the highest rate of uninsured low-income children in the nation, was almost last among states in high school graduation rates, ranked almost last in state investment in higher education and the arts, and had a growing list of unfunded highway projects.

This precipitous slide in services was created because the state couldn’t use all the money it was collecting from the state’s already-low taxes. Instead, TABOR mandated $3.2 billion in rebates to taxpayers. This retreat from public service occurred as Colorado outpaced the nation in personal income during the last decade.

And then the economy sputtered. By November 2002, Colorado had the third worst budget gap in the nation. But the "Taxpayers Bill of Rights" formula is not linked to productivity and cannot respond to the ups and downs of the economic cycle. Services in Colorado will never recover from the cuts made during the economic downturn because TABOR permanently lowers the base from which limits are calculated (the "ratcheting effect"). The ratcheting effect has had such a serious impact on Colorado’s fiscal well being that even the state’s conservative governor, a staunch supporter of TABOR, recently predicted that it will be changed.

Far from "protecting" Colorado during the economic downturn, as supporters have claimed, TABOR has put Colorado in an uncompromising vise where families, students, the elderly, the poor, and the sick come in last.

We hope our friends in Wisconsin will look beyond partisan politics and the unsubstantiated rosy picture offered by this bill’s supporters and learn from Colorado’s mistakes. If not, they could be biding farewell to fundamental and critical services and welcoming even more financial woes.

Wade Buchanan is president of The Bell Policy Center, a nonpartisan, nonprofit organization in Colorado.

(Reprinted with permission of the author.)