NTF Issue Paper: ntfpetition7. 7-03.
NEBRASKA TAXPAYERS FOR FREEDOM ISSUE PAPER:
THE TABOR AMENDMENT FOR NEBRASKA.
BACKGROUND.
The TABOR (Taxpayers Bill of Rights) is a
constitutional amendment passed by Colorado voters in 1992.
Since 1993, it has applied to both state and local taxing authorities,
all other levels of government, and includes
state general fund operating expenditures and cash funds.
It purposely restrains the ability of government to raise and spend
revenue. Its objective is to restrain the growth of government.1
Growth in capital construction and cash funded programs have limits only
under the TABOR revenue limitation.2
THE
FORMULA. The
first year allowable revenue x population increase + inflation = 2nd
year allowable revenue growth. In
2001, Colorado population growth + inflation in prior calendar year = 5.1%.
Local net percentage change in actual value of all taxable real property
+ inflation of prior calendar year = local revenue growth.
Change in student enrollment + inflation of prior calendar year
determines school district revenue growth.
Excess revenues collected above the TABOR limit must return to taxpayers.
Government subdivisions may request voter approval to retain and spend
all or a part of the TABOR surplus.
TAXES.
TABOR limits property tax rates, assessment rates,
and tax collections. It requires
voter approval by referendum to increase taxes or create new taxes, increased
debt, or new debt, to increase property tax levies, extend an expiring tax,
approve a tax policy change directly causing a net tax revenue gain, and approve
all net revenue increases such as assessment rates for any class of property.
TABOR forbids real estate transfer taxes but does not apply to fees.
Taxing authorities can lower tax rates, mill levies, and debt limits
without voter approval.
SPENDING.
TABOR prohibits weakening existing spending
limitations. It restricts the rate of spending growth by state and local
governments to the inflation rate plus the percentage change in population for
the prior year. Excess revenue
rebates to the people via tax cuts or temporary tax credits, unless the people
approve in a referendum vote to spend the surplus on a specific list of programs
and projects.
OTHER
PROVISIONS. TABOR
requires an emergency reserve fund equal to 3% of fiscal year spending. Reserves earmark only for a declared emergency such as a
natural disaster like forest fires, not for economic recessions, revenue
shortfalls, or salary hikes for government employees.
SURPLUSES.
A Colorado revenue surplus has existed since FY
1996-1997; in FY 2000-2001 it equaled $941 million, which returned to taxpayers
in FY 2001-2002. Surpluses occur
when revenues collected are above the amount of revenue allowed by TABOR for the
state to retain. The state
legislature created a 6-level sales tax rebate to refund excess revenue to
taxpayers. The refund is on the
state income tax form. The
legislature passed 2 income tax rate reductions in 1999 and 2000 and 1 sales tax
reduction in 2000. The income tax
rate dropped from 5% to 4.63%, and the state sales tax rate dropped from 3% to
2.9%. 17 triggered TABOR refund
mechanisms have passed the legislature. Refund
mechanisms, in the form of tax credits and exemptions, are temporary, only in
years when there is a surplus. If
the state or a local government wants to keep and spend all or a part of the
TABOR surplus, it must ask voter approval.
5 initiatives and referenda have appeared on state ballots to request
voter approval. Local governments
have placed hundreds of approval requests on local ballots since 1993.3
THE
RESULT. TABOR
has not starved state government operations.
The budget has grown about 5% annually.
From 1993 through 1999, voters have approved city requests to spend
surpluses 325 out of 356 instances. Cities
that have proposed new taxes have won voter approval 13 out of 27 ballots.
Voters have approved increasing existing taxes 42 of 81 times.
“Here, shifting responsibility for taxes from politicians to the public
hasn’t resulted in automatic rejection of every spending plan.
TABOR hasn’t straitjacketed government,” said the Rocky Mountain
News.4
Surveys continually have shown that Colorado citizens understand and
support the specific provisions of TABOR. From
a taxpayer perspective, surplus revenue represents excess taxation that must
return to taxpayers. After several
decades of state spending increases more rapid than state economic growth, state
spending now is growing less rapidly than state income. The TABOR surplus
revenue rebate mechanism returned $3.25 billion over 5 yrs. to taxpayers,
equaling $800 per capita. The average family of 4 paid almost $16,700 less in
taxes since 1992. Unfortunately, strong special interest groups in Colorado,
like the education lobby, successfully have garnered a significant part of the
TABOR surplus, now earmarked for spending on K-12 education.
Other special interest lobbies like municipal governments and
transportation entities have similar designs on TABOR surplus revenues.5
Since 1992, job growth in the private sector has almost doubled that of
government job growth in Colorado.6
NEBRASKA
APPLICATION. A
TABOR-NE amendment will give us disenfranchised taxpayers a sense that state and
local government is accountable to us, that we, not unheeding public officials
and bureaucrats, control our government. It
will heighten interest in elections and government policy. It will increase
voter participation by boosting the number of issues on which citizens can vote.
While conservatives may campaign to defeat a referendum in order to turn a
surplus into a tax cut, liberals might support a referendum to spend the surplus
on government schools or expanded welfare benefits.
It will reduce voter sense of helplessness over the increase and use of
our taxes and increase the fiscal responsibility of state and local taxing
authorities. TABOR will have a
stimulus effect emanating from efficiencies gained by allowing citizens rather
than government to spend money, leading to expansion of our economy.
CONCLUSION.
Nebraskans, particularly because of an apparent
urban-rural differing perspective, cannot agree on a specific formula of tax and
spending reform and relief that involves reconstituting the means by which the
state and local governments collect tax revenue and spend revenues.
Our NTF survey disseminated throughout the state to our members and the
general public shows no consensus or agreement on reconfiguring our tax
structure. Therefore, the only way
to accomplish timely and meaningful comprehensive tax and spending reform is to
first apply the brakes to state and local government taxing and spending.
A TABOR-NE constitutional amendment would accomplish this objective
precisely and thoroughly. View additional information on our web site at www.netaxpayers.org.
PROPOSED
TEXT FOR TABOR-NE AMENDMENT:
ARTICLE VIII: Revenue
Sec.
1. The necessary revenue of the
state and its governmental subdivisions shall be raised by taxation in such
manner as the Legislature may direct provided the eligible voters of the
affected jurisdiction approve such increased tax rates or new taxes or fees on
income, property, or on purchases of goods and services.
Notwithstanding Article I, section 16, Article III, section 18, or
Article VIII, section 4, of this Constitution or any other provision of this
Constitution to the contrary: . . . . .
Sec.
14. Any increase in existing tax
rates or new taxes or fees on income, property, or on purchases of goods and
services adopted by the Legislature or by any governmental subdivision in the
state must be placed before the eligible voters of the affected jurisdiction at
a public election for their approval, before the tax change becomes effective. If
a majority of votes cast is not in favor of the proposed tax change, it will not
become effective.
Research and documentation for this issue paper done by Doug Kagan, with express prior permission granted for its use by Taxwatchers, Inc., Citizens for Local Control, Dawes County Taxpayers, and other groups in the Tax Freedom Network. 8-02 Rev. 6-03 and 7-03. C