Tax Justice Digest stories about Colorado
Colorado might permanently loosen a constitutional constraint that has caused the state on-going fiscal damage, the so-called Taxpayer Bill of Rights (TABOR).
Voters approved an amendment to their constitution enacting TABOR in 1992. TABOR limits the growth of state revenues to a combination of inflation and population growth by requiring that any revenue in excess of this limit be refunded to taxpayers. TABOR also requires that any tax increase be approved by voters. The main problem is that inflation is only a very crude measure of changes in the costs faced by state and local governments, which for the most part have outpaced inflation in the rest of the economy.
In 2000, Colorado voters complicated matters further by approving a very different measure, Amendment 23, which mandates an increase in funding for K-12 education by at least 1% plus inflation every year. This amendment was a response to the dismal state of Colorado public schools in the wake of unrealistic revenue restrictions enacted in TABOR.
Enacting both of these provisions made sense to many voters who would like to see both lower taxes and more spending on education. The problem is that the combination of TABOR and Amendment 23 serve to starve transportation, higher education and just about anything that is not K-12 education.
Now, Colorado House Speaker Andrew Romanoff, with the backing of Governor Bill Ritter, plans to unshackle the legislature from these impossible demands. His proposal, if approved by two thirds of both chambers and by the voters, would repeal Amendment 23 and the part of TABOR that requires the state to refund taxes when the revenue limit is exceeded. Fortunately, the citizens of
But one problem associated with TABOR would not be fixed under this plan: tax increases would still require voter approval. Of course, it would be better if the
Arkansas Governor Mike Beebe has called a special session starting Monday to consider a higher severance tax on natural gas. The Governor says that the tax hike will eventually raise as much as $100 million to help pay for state highways. The current level of tax was established in 1957 and is based on the volume of gas extracted. Beebe's proposal would change the tax base to market value, bringing Arkansas in line with what most states have been doing since the 1970s. Basing the tax on market value would ensure that inflation will no longer erode the value of revenues generated by the tax, which is currently providing natural gas companies with an effective tax cut each year. A 2003 ITEP study of the Arkansas natural gas tax found that if the state had imposed a 5 percent tax on the market value of natural gas in 1975 (rather than basing the tax on volume) the state would have raised $610 million between 1975 and 2001, instead of the $13 million it actually collected. For more on the state's severance tax and potential reforms read this report from Arkansas Advocates for Children and Families.
Higher severance taxes may soon be on the agenda as well in Colorado, where environmental groups and higher education advocates have banded together in support of a ballot initiative to generate $200 million in additional revenue from the oil and gas industries. The proposal would eliminate several severance tax deductions and exemptions, the most notable of which allows companies to write off 87.5 percent of their property tax bills. The revenue generated would go to fund college scholarships and renewable-energy programs, among other things.
After years of starving state government through the so-called Taxpayer Bill of Rights (TABOR) the piper may finally get paid. It seems that a wave of ballot initiatives will ask Colorado voters next year to increase taxes to pay for government services and programs they feel are important. According to The Bell Policy Center, at last count there were 17 initiatives in the works that deal with raising revenue. The proposals include using fees on new construction to fund education and a new tax on junk food.
Currently Colorado ranks near the bottom for education and highway spending compared to states around the nation. Over the years since TABOR was enacted, many in Colorado have realized that taxes are necessary for government to function and have turned to the initiative process as a flawed, second best alternative to having a legislature that can make responsible tax and fiscal decisions.
Advocates of Colorado-style "TABOR" tax and spending limits are seeing mixed success in efforts to get TABOR limits on the November ballot. Maine voters will have their say on a TABOR proposal that the Portland Press Herald sees as "the wrong approach." But a restrictive Ohio proposal will likely be pulled from the November ballot. Meanwhile, a terrific Denver Post editorial argues that their TABOR law still hurts the state's economy-- even after being pared back by voters last fall.
