WASHINGTON – New post-recession revenues are pouring into state coffers across the nation, but activists in several states are leading “revolts” to make sure their governments don’t use this new wealth for tax and spend schemes without taxpayers’ approval.
“We are in a major revolt right now,” said Mary Adams, head of the petition drive to get a Taxpayer Bill of Rights (TABOR) on the November ballot in Maine. Last month, the office of the secretary of state in Maine verified 50,519 citizen signatures in favor of putting the measure on the ballot.
Like in other states across the nation, the Maine effort for a TABOR is aimed at setting spending limits on the annual growth of government. It outlines the percentage of future surpluses to be returned to taxpayers in the form of rebates and the rest to be put in a reserve account. The TABOR also allows taxpayers to vote on tax hikes.
“In essence, it will put the taxpayer in control of future tax increases,” Adams said.
According to the National Taxpayers Union in Washington, D.C, similar ballot initiatives in Oklahoma, Montana, Nevada, Ohio and other states are a reaction to continued tax burdens despite recent windfalls in state revenues. As of 2005, 30 states already had some form of tax and spend limitations on the books.
“States are recovering from the economic slowdown and are flush with revenues and are faced with a choice — restrain spending, build up reserves and set aside tax increases,” said Pete Sepp, spokesman for the NTU. Another choice, he said, is to “listen to the pent up demands from spending interests that feel they didn’t get enough from 2001 through 2003.”
In California, Republican Gov. Arnold Schwarzenegger is using his state’s estimated $7 billion in new revenues for a budget increase of 8.4 percent for 2007 that includes a record total spending of $54.3 billion for K-12 education and $170 million for uninsured children.
According to a recent study by Chris Edwards, director of tax policy studies at the libertarian Cato Institute in Washington, D.C., state and local tax revenues increased by 8.1 percent in 2004 and an estimated 7.6 percent in 2005. By 2005, tax revenue for the 50 states was up 18 percent over the pre-recession peak of 2001, and federal aid had grown at more than 7 percent annually since 2000.
Edwards pointed out that many states are using their new revenues to “expand their budgets beyond sustainable levels,” and several states continue to have high tax burdens despite notable revenue increases between 2002 and 2005.
“I think, at least here in Oklahoma, it is a case of people looking at the process and trying to tell the state to stop,” said Rick Carpenter, an activist with Oklahomans in Action, which is awaiting the verification of some 300,000 signatures in favor of a Stop OverSpending (SOS) ballot measure.
The measure, similar to other TABOR initiatives, would limit spending to the rate of inflation plus population growth.
“What this initiative does, it allows government to grow steadily every year and creates a stronger rainy day fund that’s harder to get into,” said Carpenter. As of 2005, Oklahoma had $314 million in increased revenues plus a $415 million surplus. He said taxpayers are demanding that money go to tax relief.
Critics of the ballot initiatives point out that many governors and state legislatures are considering tax relief in addition to new spending, indicating that state officials may not be as blind to taxpayers’ needs as petition-drivers are suggesting. Recently, a group of Oklahoma business leaders launched a lawsuit against the ballot initiative, saying the SOS proposal is unconstitutional.
“There are other ways to influence representatives to cut taxes,” said Iris Lav, deputy director of the Center on Budget and Policy Priorities, which opposes the TABOR and SOS initiatives.
Nonetheless, initiative efforts across the country include both tax and spending controls, such as a property tax restraint measure in Nevada, a Tax and Expenditure Limitation proposal in Ohio and a Stop OverSpending initiative in Montana. The tenets are all based, in part, on a TABOR passed in 1992 in Colorado, which has since modified its restraints. Critics say the changes show that the model was flawed.
Mike Starn, spokesman for the Maine Municipal Association, whose members include local employees and officials, plus boards, commissions and other government associations, said that while the Maine TABOR has been changed to avoid the problems faced in Colorado, “it’s particularly harsh on local governments and schools, and I don’t think it will sit well with Maine people because they take pride and value in their local governments.”
Starn added that spending and tax limit initiatives have been broadly attacked by non-profits, unions and government associations, mostly because programs supported by those groups, including health care for the poor and elderly and education programs, typically are the first on the chopping blocks.
Maine Gov. Richard Baldacci, a Democrat, has come out against a TABOR in his state. In a statement to reporters about the ballot initiative moving forward, state planning director Martha Freeman said: “The TABOR referendum would not institute very wise policy for Maine.”
Lav said state spending and tax initiatives sound good on the surface, but a closer look reveals a formula for disaster. For instance, not all states have fully recovered from the recession, and services in many states have not yet reached pre-2000 levels.
“It was a very slow recovery,” she said.
In addition, Lav said the need for services, particularly for the elderly and education, often outpaces inflation and population growth annually. “You actually cut the services that need to be provided. That’s what was happening in Colorado.”
But proponents of TABOR, including Colorado Republican Gov. Bill Owens, say these and similar measures include provisions for the taxpayers to change TABOR conditions to adapt to new fiscal realities.
“The fact is, if the state decides that it needs to spend more money they bring it back to the people and they decide,” said Heather Wilhelm, spokeswoman for the Illinois-based Americans for Limited Government, which is supporting initiatives in several states.
Critics contend that not all states are ignoring tax burdens in the face of budget windfalls this year.
For example, a $500 million surplus in Connecticut is prompting Republican Gov. Jodi Rell to talk tax cuts there. Others broaching the topic are Republican Govs. Mitt Romney of Massachusetts and Jeb Bush of Florida as well as New Mexico Gov. Bill Richardson and Arizona Gov. Janet Napolitano, both Democrats. Oklahoma Democratic Gov. Brad Henry is proposing targeted tax cuts for retirees.
Lawmakers in New York, Hawaii, Maryland and Alabama are also seeking some measure of tax relief, according to news reports.
“I would be surprised if there weren’t a lot of tax cuts this year,” Lav said.
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