Tax-Hikers Win Colorado Ballot Initiative

Published December 1, 2005

Colorado voters on November 1 approved Referendum C, a measure to give up nearly $4 billion in tax rebates over the next five years and permanently increase the cap on spending in the state’s constitution. They rejected Referendum D, which would have allowed Colorado lawmakers to borrow $2.1 billion.

Both votes were close: 52-48 percent to approve Referendum C, and 51-49 percent to reject Referendum D. Turnout was low: 46 percent compared to 87 percent in the November 2004 election.

Taxpayer advocacy groups across the country, as well as lawmakers, public employee unions, and business firms that seek state government contracts, closely watched the election. In many instances they aided the campaigns.

The election had national interest because the tax rebates were due under Colorado’s Taxpayer’s Bill of Rights (TABOR), which limits the state’s power to raise taxes and spending. Tax and spending limitation proposals are being considered in nearly two dozen states.

Owens Defends His Role

“I did what I thought was right, and Colorado is going to be the better for it,” Republican Gov. Bill Owens told reporters at the Rocky Mountain News soon after the outcome was known. Owens led an unusual coalition of his Republican allies, Democrats, big business interests, and left-leaning advocacy organizations in support of the referenda.

Local taxpayer organizations, led by the Colorado-based Independence Institute, joined forces with national groups including FreedomWorks, Americans for Tax Reform, and the National Taxpayers Union to oppose the measures. Grassroots Republicans in Colorado and across the country denounced Owens for joining the big-government forces.

“The referendum proponents did a couple of things right,” said Jon Caldara, president of the Independence Institute. “They chose an off-year election, when there would be a low turnout, making their get-out-the-vote effort more effective. They also got every bureaucrat, every tax-receiving organization to endorse it. But at the end of the day it was Bill Owens’s broken pledge not to raise taxes that was the reason this passed. He was able to bring over enough Republicans who otherwise would have been on our side.”

Caldara also complained the state’s major news organizations “shamelessly pimped the referendums non-stop,” noting the Denver Post ran a front-page editorial in favor of the referendum, “the first time I can ever remember them doing a page 1 editorial.”

Big Business Supported Hikes

Caldara said the campaign taught him a valuable lesson: “While our free-market movement has been taking on public employee unions, we have yet to recognize the real danger, which is bureaucrats in Republican clothing. Big business was for this in a big way. There is no tax increase without the Chamber of Commerce.”

At FreedomWorks, which has more than 8,000 members in Colorado, president and CEO Matt Kibbe said, “Obviously it is very disappointing that a small majority of special election voters in Colorado favored this $4 billion tax increase. Our side was outspent nearly four to one, and as a movement we did not spend enough money on grassroots organizing to counter the public employees union effort. If there’s one thing learned, it’s that you lose if you don’t invest in grassroots first.”

Jonathan Williams, staff economist at the Tax Foundation, said Colorado residents were misled about the cause of the state’s budget problems.

“TABOR was not the inherent cause of budget problems–Amendment 23 was,” he said. “Amendment 23 was approved by voters in 2000 and mandated increased spending on education, regardless of the revenue situation.”

Williams added, “Opponents of TABOR will likely try to use Colorado as an example of how taxpayer protection measures are too much of a burden on government services. However, other states that are debating TABOR should recognize the undue pressure that Colorado’s Amendment 23 put on the TABOR-based budget.”

Democrat Donors Backed Measures

The Denver Post reported about 75 percent of the money raised in favor of the tax hike came from groups expected to benefit financially from the passage of Referendum C.

It was not revealed until the day after the election that three major Democrat donors gave the pro-tax hike campaign $570,000. Billionaire heiress Pat Stryker, who helped fund the Democrats’ takeover of the state House in the November 2004 election, gave $280,000. Millionaires Tim Gill and Jared Polis gave $250,000 and $40,000, respectively.

Delaying the release of the Democrat donors’ names, some referendum opponents said, was a tactic intended to hold on to Republican support for the tax measures.

Impact on Other TABOR Efforts

The Colorado Springs Gazette, which endorsed the tax hike, editorialized, “The passage of Referendum C could have at least one unfortunate consequence outside Colorado. If this vote is viewed as a repudiation rather than just a fine-tuning of TABOR, it could be a serious setback for those promoting TABOR-like budget control measures in other states.”

The editorial continued, “We would hate to see that happen because even an imperfect TABOR is better than no TABOR at all, and because those states would likely fine-tune the concept to take into account Colorado’s not flawless, but still overwhelmingly positive experience with this law.”

Bill Becker, executive director of the Maine Heritage Policy Center, said, “The Colorado vote is proof that TABOR works. TABOR allows the people paying the bills, not politicians, to have the final say in exceeding tax and spending limits.” Maine is close to enacting its own taxpayer protection measure.

Max Pappas ([email protected]) is director of policy at FreedomWorks, a grassroots organization with more than 700,000 members nationwide.