Commentary: Spending Limit Foes Feign Support for Tax Relief

Published November 1, 2006

The gloom-and-doom arguments must not be working for opponents of tax-and-expenditure limits (TELs) that are popping up on ballots across the country.

The traditionally pro-big-government anti-TEL folks are now spreading the word that tax cuts might be “endangered” if voters approve proposals to control the growth of government.

Ranging from Maine’s proposed Taxpayers Bill of Rights (TABOR) to Oklahoma’s Stop OverSpending (SOS) initiative, at least six 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.

Fear of Nationwide Movement

The tax-and-spenders know 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. Because the tired “state programs will be hurt” mantra against TELs hasn’t made 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.

Fiscal Falsehoods

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,” claims, “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 an August 13 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 be on the taxpayer’s side when it comes to fiscal battles.

Doug Kagan, chairman of Nebraska Taxpayers for Freedom, rightly points out that the Nebraskans for the Good Life’s argument “is still false, because state aid has never lowered or [even] 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 “endangered tax cuts” mantle: State government is also cloaking itself in this game of political charades.

In a not-so-surprising turn of events, for example, 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 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.

Wide Range of Relief

In response, taxpayer advocates point out 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.

Giving voters more control over the budget process is what the spending limit plans are all about, supporters say. If taxpayers want fixed-amount tax cuts, then they can vote for them at the ballot box.

In fact, a resounding electoral margin on behalf of tax cuts might help 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.

Revenue Returns

In almost all cases, the TEL amendments on this year’s ballots have some sort of provision for returning to taxpayers any surplus revenues collected beyond the spending limit.

Nevada’s Tax and Spending Control initiative, for example, helps taxpayers by returning excess revenues–those left over after the Emergency Reserve Fund and the Budget Stabilization Fund have been filled–to the 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.

Tax Cut Protections

Finally, nearly all the TEL initiatives make exceptions to the spending limit for money designated for tax relief. This is important because these provisions 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 from the state spending cap for “moneys appropriated proportionately for taxpayer relief,” while Oregon’s Rainy Day Amendment excludes “money to fund tax and other refunds” along with money dedicated to income tax rebates.

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.

Kristina Rasmussen ([email protected]) is senior government affairs manager at the National Taxpayers Union. A version of this article originally appeared August 31 at Human Events Online. Used with permission.

For more information …

“Who’s funding lid movement?” Lincoln Journal Star,

Maine Taxpayer Bill of Rights,

Nebraska Stop OverSpending,

Oklahoma Stop OverSpending,