TABOR, the Taxpayer's Bill of Rights in the state constitution, will hurt our recovery in many ways, all based on its overly simplistic principle that small government is always best. Since 1992, it has disincentivized saving; it has further polarized decisions about providing basic public services like education and health care, and it’s why we have an unfair tax system that lets the rich contribute a smaller share of their income in taxes than everyone else.
Unlike our household budgets where we save when times are good, and unlike most other states, Colorado’s revenue is restricted when the economy is growing. Instead of building a rainy day fund that banks increased revenue, Colorado has returned $419 million since 2009. Despite these restrictions, lawmakers have still managed to increase state reserves from just 2% of spending in 2009 to 7.25% in 2019.
During that same period, state per-pupil support for education never caught up to where it was before the Great Recession. Prior to the pandemic, Colorado’s school funding was already $2,700 below the national per-pupil average. We are about to see the price of doing more with less when our already underfunded schools react to COVID-19-related budget cuts and inadequate reserves with layoffs, shorter school weeks, and more fees.
Proponents of TABOR recently suggested that underfunding is actually good because it means cuts are smaller. That analysis defies logic. Economic activity fell by 25% during the stay-at-home period, which resulted in a 25% drop in revenue. But the impact of a 25% reduction is different depending on where you start. For example, a Colorado family making $250,000 a year is going to have an easier time handling a 25% pay cut than a family making $45,000. Both will have less, but the wealthier family will be better positioned to come back. The same is true for our school districts, community colleges, and other public investments, which will now have to deal with the consequences of more cuts after doing without adequate resources for so long.
TABOR also makes it harder to adjust to quickly changing economic conditions by turning every tax question into an expensive political campaign. Not only does voter approval of tax policy mean decisions can only be made in November, but TABOR requires difficult-to-understand language that disguises who would pay and how much. Well-funded campaigns then exploit that deceptive language to keep the status quo. It’s no secret that the loudest voices in state ballot measures concerning taxes usually don’t come from average Coloradans, but those who benefit from the current system and have money to buy TV ads.
If that wasn’t enough, TABOR also makes it illegal to tax higher income at higher rates. Is it any wonder that most Coloradans contribute a higher percentage of their income in taxes than the wealthy?
Finally, while few would disagree we are in a health emergency, TABOR even takes a cynical approach to tax policy in these dire times. Whether it’s the requirement of a two-thirds vote to enact an emergency tax or the possibility that any emergency tax would ask low- and moderate-income families to pay more, the suggestion that TABOR could help in this emergency, rather than hurt, is wishful thinking.
Colorado is an incredible state full of adventurous, innovative people. Simplistic ideological promises won’t help get us through this. Instead, we need prudent, common-sense approaches to public investment that support and maintain the communities we want to live in. We can get through this, together, and recover. But that recovery will be in spite of TABOR, not because of it.
Carol Hedges is the executive director of the Colorado Fiscal Institute.