How Colorado Put the Brakes on High Taxes

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(Host) Commentator John McClaughry says that some interesting new innovations in tax policy are being pioneered out west.

(McClaughry ) On Town Meeting Day 2002 it sounded like more and more Vermonters were one way or another venting hostility at being overtaxed. What can citizens do when they increasingly see themselves as overtaxed? For starters, they could take a look at Colorado.

The Rocky Mountain state is not famous as a “conservative” state. It is very competitive politically, electing liberals like Governor Roy Romer, Senator Gary Hart, and Senator Tim Wirth, and conservatives like Governor Bill Owens, Senator Bill Armstrong, and Senator Hank Brown. Though rather closely balanced politically, Colorado voters have acted to put the brakes on government taxing and spending.

Colorado has a citizen initiative law. Four times citizens used the law to promote a tax and expenditure limitation. The first three efforts lost at the polls by narrow margins. On the fourth try, in 1992, the voters approved a constitutional amendment known as the Taxpayer Bill of Rights (TABOR).

TABOR basically says that state spending in inflation-adjusted dollars cannot increase faster than the rate of population growth. Any revenue collected over that limit must be returned to taxpayers. All tax rate increases have to be approved by the voters in a general election referendum. No state funds can be used to support or oppose any ballot question.

Colorado liberals fought TABOR bitterly. Nonetheless, it passed with 53% of the vote.

At a recent conference Governor Owens cited the results of Colorado’s voter-enforced tax and expenditure limits. According to the nonpartisan Tax Foundation, Colorado collects the fourth lowest taxes per capita in the nation. In the 1990s it was first in per capita income growth, third in population growth, and fifth lowest in poverty rate. The Corporation for Enterprise Development is a liberal-leaning group that uses numerous social and environmental statistics in its rating scheme, as well as economic numbers. It rates Colorado as having the best business climate in the country.

Says Governor Owens, “All of this is made possible because we have had the common sense in Colorado to limit the growth of government. That has allowed the nongovernmental sector to grow and prosper. We have been able to cut taxes by a billion dollars in the three years that I have been governor, out of a $6 billion general fund budget. We have cut the income tax twice. We have cut the sales tax once. And we were the pioneer in passing the flat tax. Colorado’s income tax can be filled out on essentially a postcard-sized piece of paper.”

What would it take to replicate Colorado’s successes in Vermont? For one thing, Vermont needs some form of citizen initiative to allow the taxpayers to put the heat on their legislators. But most of all, Vermont needs political leaders like Governor Owens, with the courage to stand up and say, “We need smart government, not more government; limited government, not accelerating government; lower taxes, not higher taxes; and more economic opportunity, not more government control.”

This is John McClaughry ¿ thanks for listening.

John McClaughery is president of the Ethan Allen Insitute, a Vermont policy research and education organization.

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