More Evidence that Balanced Budget Rules Don’t Work as Well as Spending Caps
July 16, 2016 by Dan Mitchell
If you asked a bunch of Republican politicians for their favorite fiscal policy goals, a balanced budget amendment almost certainly would be high on their list.
This is very unfortunate. Not because a balanced budget amendment is bad, per se, but mostly because it is irrelevant. There’s very little evidence that it produces good policy.
Before branding me as an apologist for big government or some sort of fiscal heretic, consider the fact that balanced budget requirements haven’t prevented states like California, Illinois, Connecticut, and New York from adopting bad policy.
Or look at France, Italy, Greece, and other EU nations that are fiscal basket cases even though there are “Maastricht rules” that basically are akin to balanced budget requirements (though the target is a deficit of 3 percent of economic output rather than zero percent of GDP).
Indeed, it’s possible that balanced budget rules contribute to bad policy since politicians can argue that they are obligated to raise taxes. Continue reading
Spring of inaction: 2016 legislative session proves Illinois needs a taxpayer bill of rights | Illinois Policy | Illinois’ comeback story starts here
Illinoisans need a taxpayer bill of rights so that politicians must ask permission from voters if they want to raise taxes.
Colorado adopted a Taxpayer Bill of Rights, or TABOR, as an amendment to the Colorado Constitution. The Colorado TABOR requires any government to seek voter approval before imposing a new tax or raising existing tax rates. The TABOR also contains a formula that determines how much in taxes a government can collect in a year, based on increases in population and inflation. If more revenues are collected than the formula allows, then the governing entity is required to reimburse the excess money back to the taxpayers.
A provision in Colorado’s TABOR allows excess revenues to be kept by the government if the taxpayers give voter approval through a ballot initiative. Anytime there is a proposal to raise taxes or keep excess tax revenues, the ballot must provide the following: information on the governing entity’s current and previous four years of spending, the proposed tax increase in percentages and estimated dollar amounts, and summaries of support for and opposition to the proposed tax increase.
Over two decades have passed since Colorado voters adopted The Taxpayer’s Bill of Rights in 1992. TABOR allows government spending to grow each year at the rate of inflation-plus-population. Government can increase faster whenever voters consent. Likewise, tax rates can be increased whenever voters consent. This Issue Paper analyzes TABOR’s effect on state government spending and taxes by examining three decades: The 1983-92 pre-TABOR decade; the first decade of TABOR, 1993-2002; and the second decade, 2003-12. The final decade included the largest tax increase in Colorado history, enacted as Referendum C in 2005. Decade-2 was also marked by increasing efforts to evade TABOR by defining nearly 60% of the state budget as “exempt” from TABOR.
Tax-and-Spending Limitation Results
The Taxpayer’s Bill of Rights Amendment has worked well to achieve its stated intention to “slow government growth.” Although government has still continued to grow significantly faster than the rate of population-plus-inflation, the Taxpayer’s Bill of Rights did partially dampen excess government growth. It did not cut or reduce reasonable government growth.
In terms of economic vitality, Colorado’s Decade-1 was best for Colorado. Unlike in the pre-TABOR decade, or in TABOR Decade-2 with its record increase in taxes and spending, because of Referendum C, Colorado’s first TABOR decade saw the state economy far outperform the national economy.
7 winners and losers: Breakdown of the 2016 Colorado legislative session
May 11, 2016 Updated: May 11, 2016 at 10:45 pm
The 2016 Colorado legislative session may go down in history as the year of little change.
The politically divided chambers in the General Assembly resulted in neither party having much success with their lengthy agendas.
That’s not necessarily a bad thing for political moderates or independents who don’t care about party agendas, but for everyone else, they’ve got something in the loss column this year.
That means 2017 won’t see major policy changes on things like clamping down on construction defects litigation or equal-pay legislation.
Here is a look at some of the winners and losers from the session, which concluded Wednesday:
The Joint Budget Committee
Any politician who can emerge from 120 days of politicking and still look like a high-functioning, level-headed individual. The three Democrats and three Republicans on the Joint Budget Committee received more than their share of accolades for crafting a 581-page budget that somehow managed to appease both sides. Sen. Kent Lambert, R-Colorado Springs, and Rep. Millie Hamner, D-Dillon, led the committee to a $25.8 billion budget that averted major cuts and – perhaps more significantly – the gridlock all too common across the nation when politicians dig in their heals.
Colorado Legislators May Push HPF Through Constitutional Loophole
The House Committee on Appropriations voted 7–6 on March 29 to refer House Bill 1420, sponsored by House Speaker Dickey Lee Hullinghorst (D-Boulder County) and Sen. Larry Crowder (R-Alamosa County), to the Committee of the Whole.
HB 1420 would establish the Colorado Healthcare Affordability and Sustainability Enterprise (CHASE) as a government-owned business to administer the state’s HPF. HPF is the vehicle by which Colorado expanded Medicaid under the Affordable Care Act (ACA) in 2014 and by which the state collected almost $700 million in revenue the following year.
CHASE’s designation as an “enterprise” would exempt the program from the state constitution’s TABOR, which mandates voters shall decide at the ballot whether Colorado must refund to taxpayers surplus revenue collected by the state, except when the surplus comes from a state “enterprise.”
If passed, CHASE will take effect on July 1, 2016, provided the federal Centers for Medicare and Medicaid Services (CMS) determine the program complies with federal law, according to the bill’s fiscal note.
Linda Gorman, director of the Health Care Policy Center at the Independence Institute, says the bill manipulates the meaning of “enterprise” in order to circumvent the state’s constitution.
Colorado’s Budget Settled, Debate Coming On Taxes, Refunds « CBS Denver .
Speaker Dickey Lee Hullinghorst and other Democrats, including Gov. John Hickenlooper, want the fee set aside to avoid refunds under the Taxpayer’s Bill of Rights, free millions of dollars for Colorado’s underfunded roads and schools, and give momentum to pending ballot initiatives that would ease TABOR’s grip on state finances.
It’s a debate that some thought settled well before both chambers approved the $27 billion budget last week. Not so, said Hullinghorst, a Boulder Democrat.
“In this budget we managed to get by, but next year it will be twice as bad with cuts in education and higher education,” she said. The House could debate her bill this week.
Hullinghorst said reclassifying the fee can provide at least five years’ flexibility to spend more on schools and roads, and tackle TABOR and other constitutional restrictions on budget writers’ room to maneuver.
TABOR requires refunds whenever total state income surpasses a cap that’s based on inflation and population, not the economy’s performance.