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What is TABOR?




A Taxpayer Bill of Rights (TABOR) is a tax and expenditure limit scheme applied at the state level. It purports to "limit" government growth, but is designed to ultimately shrink state and local government capacity to provide services. These efforts may be called something else, especially in the wake of the disastrous effects in the only state where it's been tried, but TABOR by whatever name:

  • is a constitutional amendment
  • restricts revenue or expenditure growth to the sum of inflation as measured by the Consumer Price Index (CPI) plus population change
  • requires tax revenues in excess of the amount set by the limitation formula to be returned to taxpayers in the form of a tax refund
  • requires voter approval to override the revenue or spending limits (in other words, another full-blown statewide ballot campaign)

Why TABOR Doesn't Work

Chief among a number of reasons that the TABOR growth limit formula doesn't work is that there is no existing measure of inflation that correctly captures the growth in the cost of the kinds of services purchased in the public sector. The costs attached to education and health care, for example, have been rising at twice the rate of the CPI, which measures the costs of consumer household goods.

Moreover, a January 2005 report by the Center on Budget and Policy Priorities (CBPP) notes that subpopulations that states typically serve tend to grow faster than the overall population. According to the report, "while total population grew by 15.4 percent from 1990 to 2002, total state prison population grew by 83 percent, disabled children in schools grew by 35 percent, and the number of elderly and disabled persons on Medicaid grew by 70 percent. Over the next 40 years, the elderly population will grow at twice the rate of general population growth."

In The Flawed "Population Plus Inflation" Formula, Why TABOR's Growth Formula Doesn't Work, CBPP researchers explain that the population-growth-plus-inflation limit may seem reasonable, but is "actually a recipe for sharply reduced public services and an impaired ability to respond effectively to public needs, federal mandates, and changing circumstances."

The 'Ratchet Effect'

The same report shows that TABOR is designed to shrink government, not merely limit its growth. A little known and less well-understood provision in the original Colorado TABOR, which is the model for the other proposals being peddled elsewhere around the country, guarantees declining revenues for government services.

The "ratchet effect" requires that the population-growth-plus-inflation adjustment be applied to the amount of actual expenditures or revenue in the prior year - even if the formula would have allowed a higher amount. When state budgets decline, as most did in the recessionary years starting in 2001, actual spending is lower than the level permitted by the formula. The lower level becomes the new base, so the level of public services is permanently ratcheted down.

For more detailed information on TABOR and its effects on public services and state economies, visit the TABOR sections at theBell Policy Center and the Center on Budget and Policy Priorities Web sites.