America's independent, non-partisan advocate for overburdened taxpayers.

Commentary


Don't Buy It: Spending-Limit Foes Try to 'Care' About Tax Relief

August 31, 2006
By Kristina Rasmussen

The gloom-and-doom arguments must not be cutting it for opponents of tax-and-expenditure limits (TELs) popping up on ballots across the country. The traditionally big-government anti-TEL folks are now spreading the word that tax cuts might be "endangered" if voters approve these proposals to control the growth of government. Conservatives everywhere should be wary of such rhetoric.

Ranging from Maine's proposed Taxpayers Bill of Rights (TABOR) to Oklahoma's Stop OverSpending (SOS) initiative, six or more states are likely to have some sort of TEL on the ballot this fall. Generally, the plans would limit state (and in some cases local) expenditure increases to the yearly rise in population plus inflation. Legislative "supermajority" and/or voter approval would be required for higher rates of spending.

The tax-and-spenders know that success for these measures at the ballot box could ignite a nationwide movement to limit state and local government, so they're retooling the propaganda machine. Since the tired "state programs will be hurt" mantra against TELs isn't making headway with undecided voters, the sky-is-falling crowd hopes to attract center-right support by playing to tax relief concerns.

Yes, that's right -- the same groups who have a vested interest in keeping the spigot of taxpayer funds flowing are claiming that passing TEL initiatives would hurt the chances for tax cuts. Don't buy it. Voters have no reason to believe the disingenuous arguments coming from those who pretend to care about overburdened taxpayers but are really only looking to keep state budgets increasing by double digit percentages every year.

The fight over Nebraska's Stop OverSpending measure is a perfect example of the hypocrisy in action. The main anti-SOS group, "Nebraskans for the Good Life," states that "SOS would hurt our pocketbooks [and] ... localities would have to raise property taxes" to make up for the supposed shortfall of state funds to lower-level governments if SOS is approved.

The sincerity behind this concern is questionable on its face, considering that a Lincoln Journal Star news article described the Nebraska faction as "a coalition of state associations, including many dependent on state tax dollars." These "gimme" groups are unlikely to ever be on the taxpayer's side when it comes to fiscal battles. But Doug Kagan, Chairman of Nebraska Taxpayers for Freedom, rightly points out that "this argument is still false, because state aid has never lowered or kept our property taxes static. In fact, in 1990 the Nebraska Legislature passed a bill which heralded state aid from our state income and sales taxes as a means to lower our property tax burden. However, this was no more than a revenue grab, as all three taxes have risen since then."

Special interest groups aren't the only ones picking up the "taxpayer" mantle -- state government is also cloaking itself in the game of political charades. In a not-so-surprising turn of events, the Montana Revenue Service (whose director was appointed by an opponent of Montana's Stop OverSpending plan) recently announced that passage of the proposed TEL would require the voters to approve any form of fixed-dollar tax relief, including the one-time $400 property tax rebate being touted by the Governor. Supposedly, refunds like these will be limited and harder to obtain.

In response, taxpayer advocates point out that there is a wide range of tax relief Montana could enact with SOS in place. "Pro-rata" reductions of property and income taxes made in proportion to each contributor's share of the total tax burdens would be one option, along with refunds of user charges and fees.

Beyond this, giving voters more control over the budget process is what the spending limit plans are all about. If taxpayers want fixed-amount tax cuts, then they can vote for these at the ballot box. A resounding electoral margin on behalf of tax cuts might help to remind many a stubborn State Legislature what citizens' priorities really are. In short, passage of spending limits empowers both the legislative branch and the voters to reduce taxes.

In almost all cases, the TEL amendments on this year's ballots have some sort of provision for returning surplus revenues collected beyond the spending limit to taxpayers. Nevada's Tax and Spending Control initiative helps taxpayers by returning excess revenues -- those left over after the Emergency Reserve Fund and the Budget Stabilization Fund have been filled -- to the very people who paid them. This would occur via proportionate refunds or credits on items like state motor vehicle taxes and fees. Similarly, Maine's TABOR would remit 80 percent of all receipts that breach the cap through a "Tax Relief Reserve Fund." While politicians make empty promises, these mechanisms constitute the very definition of tax relief at work.

Finally, nearly all of the TEL initiatives make exceptions to the spending limit for money designated for tax relief. This is important because they protect taxpayers from governments that tend to portray tax relief as an "expenditure" that "costs" the state money. For example, Oklahoma's SOS measure provides a special exemption for "moneys appropriated proportionately for taxpayer relief" from the state spending cap, while Oregon's Rainy Day Amendment excludes "money to fund tax and other refunds" along with money dedicated to income tax rebates known collectively as the "Kicker".

Simply put, voters who support tax relief should likewise support the TEL plans being presented to them this November. When the opposition comes knocking on taxpayers' doors with "tax relief is in danger" slogans, state residents should let the doomsayers know they won't be conned into confusion.