Colorado has had a generally positive, but far from perfect experience with TABOR. Yet despite its shortcomings, the idea is good enough that Wyoming should adopt a modified version.
I have been skeptical of TABOR in Colorado, primarily because there is no statistical evidence that it has reduced the size of government. For the first decade after TABOR was passed, state spending grew a tad slower in Colorado than in the country as a whole. After that, though, Colorado has outpaced the national average.
This is, however, not a reason to refute TABOR. It is a reason to ask why it has not been more effective. There are two answers to that question, both of which have convinced me that we need an adapted version of the measure in Wyoming. We should not import it on an as-is basis, but rather take the entirety of the Colorado experience to heart and build a WyoTABOR.
The first answer to why TABOR has not been more effective is, simply, that it was not designed to actually shrink government. It was designed as a brake on spending. The second reason is that politicians in the Centennial State went out of their way to bypass TABOR, and eventually had some evident success in doing so.
To start with the benefits of TABOR, it has definitely put a brake on tax hikes and forced the legislature to be restrained in its spending. Every dollar of spending in excess of TABOR has required formidable lawmaking efforts, thus holding back what would otherwise most certainly have been a runaway California 2.0-style situation.
Another benefit is in the tax refunds that come with TABOR. As an example, back in July last year Americans for Tax Reform Vice President of State Affairs Patrick Gleason explained:
Any state revenue collected in excess of the TABOR cap must be refunded to taxpayers. Thanks to healthy state revenue collections coming in above the cap allowed by Colorado's Taxpayer Bill of rights, current projections show the state will have to refund roughly $500 million to Colorado taxpayers next year. ... In addition to capping the growth of state spending, TABOR requires Governor Polis and state legislators to get permission from voters in order to raise state taxes. While state legislators and previous governors have weakened and wounded TABOR in the past, it remains an incredibly effective tool for preventing a wave of tax hikes and new regulations such as those that residents of other progressive-run blue states like California, New York and Illinois have endured in recent years.
The tax refunds have made TABOR popular. Patrick Gleason notes that a ballot measure, Proposition CC, last year sought to end the refunds. It failed, with 53.7 percent of Coloradans voting to keep their TABOR refunds, but the attacks on TABOR are going to continue.
As for the problems with TABOR, they are not related to the measure itself - the brake on tax hikes - but to its limited jurisdiction. Judging from spending data it took about ten years for big spenders in the Colorado legislature to begin to find ways around the measure. One way to do this is to create state enterprises for specific spending purposes. These enterprises then charge TABOR-exempt fees. While the fees are designated for the spending program itself, the enterprise can build a cash fund that the state government then can tap into for general-spending purposes.
A WyoTABOR must address this loophole, especially since our legislative leadership spends more time in one day trying to throw us all into the Taxmageddon snake pit than they do in a year thinking about spending reform. Even if we get a TABOR on the books here in Wyoming, a straightforward copy of the Colorado measure would only incentivize our state lawmakers to turn their current income-tax proposal into proposals for new fees and charges.
To highlight the need for this expanded TABOR jurisdiction, consider another measure to erode TABOR in Colorado: paid family leave. While technically not an assault on TABOR itself, Colorado Senate Bill 188 created a family and medical leave program funded by a three-tier payroll tax. As Patrick Gleason points out, this program violates TABOR "by raising a tax without seeking the requisite voter approval", yet if the legislature wants to secure it they could turn it all into an enterprise and redefine the taxes as a fee.
Based on the good and bad experiences from Colorado, a WyoTABOR must accomplish three things:
1. An absolute no to any increase in any form of state government revenue that is not explicitly approved by voters. A WyoTABOR must extend its jurisdiction beyond the General Fund and cover all forms of government revenue. Since it has become a popular hobby among politicians around the country to reassign taxes into fees, WyoTABOR cannot be limited to taxes only.
To be clear, this also means that we put an absolute cap on revenue from all kinds of funds, including the enterprise cash-fund model used in Colorado, and our own mineral trust fund. It must not be possible for our legislators to replace taxes they can't get because we won't approve them, with money from stock-market investments. The upside of this, of course, is that our lawmakers will have a weaker incentive to expose our mineral trust fund to more risky investment forms.
2. Inclusion of local governments. Our local governments get about 37 percent of their money from the state. That share could increase under a WyoTABOR if the legislature delegated spending responsibilities to local governments, for example under a mandate-to-provide regulation. Such a measure would then also give local governments a sufficient reason to raise taxes and impose new fees where the state government could not do it. Therefore, WyoTABOR must apply to local governments as well.
3. A refusal of federal funds that mandate increased spending. Contrary to popular belief, all federally sponsored programs are voluntary for states. Congress cannot punish a state for saying no to federal funding for any program. We learned that eleven years ago when Wyoming said no to the Obama administration's stimulus funds (with a highway funding exception). It took some creative incentivizing from Washington to convince Governor Freudenthal to then convince the legislature to accept all the money. Believe it or not, but even Medicaid is voluntary, and since federally sponsored programs always end up costing the state more money - thus requiring new revenue - it is important to incorporate federal funding under WyoTABOR.
Back in December I added a couple of more points to shape WyoTABOR, one of them being a funding-priority mandate. The legislature must appropriate money to core government functions before it provides any money for any other programs. This would discourage the emotionally charged rhetoric that often surfaces when spending-addicted politicians want more of our money; if the legislature is mandated to fully fund law enforcement, fire and rescue and highways before anything else, they cannot complain about a deterioration of those functions when they ask us to go vote for higher taxes. We can then point back and say "the core functions are fully funded, go pound sand".
Again, TABOR as it exists in Colorado is far from perfect, but it has been valuable for taxpayers. The increasingly desperate efforts by the left in the Centennial State to get rid of it are in themselves excellent indicators of the value that comes with a taxpayer protection measure. We need a modified version of it in Wyoming.
We need WyoTABOR.