After the midterm elections, Colorado voters woke up to an electoral map as blue as the sky. Democrats won almost all competitive races, including every state office. They now control both houses of the state legislature. But before we permanently paint Colorado blue, we should consider the outcomes of a few statewide ballot measures.
In fact, Colorado voters rejected most of the thirteen ballot measures at the state level. All the ballot measures proposing increased taxes and/or debt were defeated by a wide margin, including measures to fund schools and transportation. However, citizens approved a majority of the state’s local school bond issues and funding packages.
The results of these ballot measures continue a trend that began when the Taxpayer’s Bill of Rights Amendment (TABOR) was ratified in 1992. TABOR requires voter approval for any increase in taxes or debt, and has proven to be the most effective state tax and spending limit in the country. Since TABOR was adopted, very few state ballot measures calling for increased taxes or debt have been approved. However, at the local level the majority of these ballot measures have passed.
Colorado voters continue to send a clear message to elected officials and special interests in Denver. They have more confidence that tax dollars can be spent wisely at the local level, but very little confidence in the various proposals to tax and spend at the state level.
This is not surprising since there is more transparency and accountability for taxes and spending at the local level, compared to the state level. Results on ballot measures to increase taxes or debt are consistent with voter surveys. When I was a member of the Colorado Tax Commission, we conducted a survey of citizen attitudes toward taxes and spending in Colorado. Citizens expressed some confidence in the spending decision of local officials, but they had very little confidence that state lawmakers spent tax dollars wisely, according to a poll.
The combination of an effective tax and expenditure limit and direct democracy has been a very powerful constraint on spending at all levels of government in Colorado. Because TABOR is an effective tax and spending limit, Colorado citizens receive tax rebates when revenue exceeds the TABOR limits. Over the past three decades, Colorado taxpayers have received tax rebates at the state and local level several times. With low rates, Colorado has one of the most competitive tax climates in the country, attracting ample business investment and jobs. In fact, the Colorado consistently performs among the top in the nation in economic growth and job creation.
The current political situation in Colorado is in contrast to a truly blue state such as California. California has a tax and expenditure limit, the GANN Amendment, similar to Colorado’s TABOR Amendment. However, in the late 1980s California gutted the GANN Amendment by exempting expenditures for transportation and education from the spending limit. Since then, California lawmakers have increased spending well beyond annual revenue, leading to a mountain of debt. In fact, some local jurisdictions in California have already declared bankruptcy, and there is a high probability that more will do so in coming years. As of now, California imposes some of the highest personal and corporate income taxes in the country. No wonder businesses and residents are fleeing the Golden State in record numbers.
We can (and should) expect special interests and elected officials to attempt to weaken and circumvent spending limits in Colorado, just as they have in California. The education lobby has already carved out a privileged position in the state budget by earmarking a portion of state income tax revenue for education, exempt from the TABOR spending limit. It only makes sense that the transportation lobby and other interest groups will try the same tactic. With monopoly control of the state government we should also expect Democrats to attempt to rescind the TABOR Amendment.
What we have learned is that direct democracy can play a powerful role in fiscal policy decisions. When measures proposing higher taxes or increased debt require voter approval, citizens can express their preferences in the most straightforward way possible. However, when these decisions are made by the legislature, they are more likely to reflect the preferences of special interests and elected officials. In democratic societies there is a persistent bias of special interests and elected officials toward more spending, higher taxes, and bigger deficits. The overwhelming evidence is that in jurisdictions where citizens exercise their rights through initiatives and referendums on fiscal issues, the outcome is more prudent fiscal policies.
In Colorado, the recent election reaffirms the right of citizens to have the final say on proposals to increase taxes or debt. Colorado citizens value their tax rebates, and more importantly their right to vote on measures to increase taxes or debt. Citizens enacted the TABOR Amendment through citizen’s initiative, and they are not about to give up these rights without a fight. They are not ready to paint Colorado blue.
Barry W. Poulson is Emeritus Professor of Economics at the University of Colorado Boulder and a senior fellow at the Independence Institute, a free market think tank in Denver.