February 24, 2016

Last year, conservatives in the State Senate passed a Constitutional Amendment limiting the growth of government spending. It’s called the Taxpayer Protection Act and will go to the voters in November for approval if the House agrees.

Would controlling the appetite of politicians for more and more spending help the economy? Iowa’s Public Interest Institute examined the effects of Colorado’s Taxpayer Bill of Rights ( TABOR ) which is their spending limit enacted by voters in 1992.

Here are some highlights and the impact on the economy.

“The intent of TABOR was to provide taxpayers the power to decide any tax increase rather than leave the decision in the hands of the Legislature. “In the ten years after TABOR was passed in 1992, the state government refunded over $3 billion to taxpayers — about $3,200 for a family of four,” stated Alison Acosta Fraser.[33]

Colorado not only reined in taxes and spending, but also experienced a period of economic growth as the “post-TABOR decade thus regained some of the ground that taxpayers had lost during the pre-TABOR decade of soaring taxes and spending.”[34] Fred Holden, a Senior Fellow at the Independence Institute, argued that with TABOR “taxpayers and businesses made more money, giving their employees more spending, saving and investing power because significantly less was taken from them in taxes.”[35] This was in addition to more employment opportunities as a result of the pro-growth fiscal policies resulting from TABOR.[36] “TABOR frees up capital in the private sector to create more wealth-creating jobs that boost productivity and output,” noted Holden.[37]

Holden described the economic results of TABOR:

• private job sector creation more than doubled while government job growth held steady;
• an average Colorado family paid about $16,700 less in state taxes during TABOR’s first decade;
• per capita state taxes and spending growth had been growing far faster than inflation-plus-population. That extreme growth rate was halted;
• state government growth was very much in line with population-plus-inflation”.[38]

Capping the power of politicians to tax and spend helps economic growth. We’re safer when pit bulls and politicians are on a leash.