AFTER THE FREEZE WISCONSIN’S TAXPAYER BILL OF RIGHTS

CHARLES J. SYKES

ometime in 2006, • Require a Wisconsin voters two-thirds vote in Scould enact some each house of the of the toughest spend- legislature to declare ing limits on govern- an emergency to ment of any state in exceed spending the country. limits and then a two-thirds vote in Early this year, each house to legislators will vote on approve a tax hike. an amendment to the state constitution • Require refer- known as the endums any time the Taxpayers Bill of state or local govern- Rights (TABOR). ment wants to either Modeled on the exceed the spending decade-old spending limits outlined in the limit in , the constitution or raise amendment would the rates of taxes need the approval of affecting individuals two consecutive legislatures and would then or businesses, such as income, sales, or cor- go to the voters in a referendum, probably in porate taxes. 2006. Similar proposals have been around for Unlike the property tax freeze, the amend- years, until now generating little momentum. ment is not subject to the governor’s veto, but But last year’s debate over the property tax like the freeze, it enjoys strong public support. freeze and rising evidence of a tax revolt seems to have galvanized support behind a broader, As written now, Wisconsin’s TABOR more comprehensive, and permanent solution would: to Wisconsin’s chronic addiction to taxation • Limit spending growth for the state and and spending. schools to the growth in population plus Despite Governor Doyle’s attempt to put a the growth in inflation and limit the happy face on last year’s 4.3 percent property growth of and municipal spending tax increases, Wisconsin remains a tax island to inflation plus new growth. and probably will remain one. Indeed, this • After creating a rainy day fund, require Charles J. Sykes is the editor of WI:Wisconsin Interest that all tax surpluses be returned to the and a senior fellow of the Wisconsin Policy Research Institute. taxpayers. He also hosts a talk-radio show on AM 620 WTMJ in Milwaukee.

Wisconsin Interest 7 year’s increases may actually be only a tempo- that in addition to holding down taxes, the rary pause as officials and interest groups wait amendment will also boost the economy by for the spring elections to pass and support for making the state more competitive. a tax freeze to fade. Wisconsin’s property tax Recent polls suggest that voters will find continues to rank as the 11th highest in the this highly appealing. country and, absent a legislative or constitu- tional mandate, Wisconsin is likely to remain A poll conducted by Public Opinion among the top five most heavily taxed states, Strategies for Wisconsin Manufacturers and even though per capita personal income has Commerce last October found that nearly three fallen 4 percent below the national average. quarters of state voters — 73 percent — say they would support a state constitutional The introduction of TABOR sets the stage amendment that would limit for a fundamental debate between those who spending increases to the rate of inflation. believe that we can grow Wisconsin’s economy Support is both broad and deep: the measure by growing the size of government; and those was supported by 82 percent of Republicans, who believe that the best chance to grow the 67 percent of Democrats and 72 percent of economy is to limit government spending and independents. An overwhelming 81 percent of taxes. voters ages 18 to 44 say they would support While not as rigid as the freeze, the pro- such an amendment. The poll found support posed constitutional limit has several notable was the strongest in the Green Bay/Appleton advantages over the budget measure: it applies area and in Milwaukee, where 75 percent of to spending and not merely taxes and it voters favored the limits on government applies to all units of government, not simply spending. local , putting the brakes on the Even so, the popularity of the spending lids political game that claims to cut spending, will likely come as a surprise, since media cov- while simply shifting taxes. More than 60 per- erage is likely to be minimal and editorial com- cent of state revenues are returned to local ment dismissive and negative. Organized oppo- units of government as “property tax relief,” a sition will be extensive, loud, and widely cov- practice that has become a perennial incentive ered, with story after story detailing the dire for increased spending. Any attempt to get a consequences of the amendment. Even so, the handle on Wisconsin’s runaway spending GOP-dominated legislature is likely to pass the without addressing both state and local spend- amendment this year and odds favor its pas- ing is doomed from the beginning, but TABOR sage in the next legislature as well (assuming caps both. It also dramatizes the stake that vot- continued Republican control after this ers have in those spending decisions by rebat- November’s election). If the amendment is ing surplus revenues directly to taxpayers. placed on the November 2006 ballot, it will Perhaps most important of all, though, is guarantee that the issue of taxes and spending TABOR’s permanence. As a constitutional will dominate that year’s gubernatorial election. amendment, the spending limits become a per- The push for a Wisconsin Taxpayers Bill of manent feature of state political and economic Rights comes at a crucial time in the debate life, permanently changing relations between over the growth of government spending: the the public and private sectors. For the first state continues to face nagging deficits despite time the state’s fiscal policy would have an ele- some of the highest levels of taxation in the ment of predictability. Not only would country, largely brought on by spending that Wisconsin likely slip from the top ten list for grew more than twice as fast as inflation for taxation, but taxpayers, businesses, and much of the 1990s. investors could have confidence that Wisconsin would not easily revert to its tax But a growing body of evidence suggests hell status. We can expect supporters to argue that much of the growth in government spend-

8 Winter 2004 ing has gone to grow the government itself At the same time, the amendment has suc- and fatten the pockets of government employ- ceeded in holding down the rate of spending ees rather than growing the services offered to growth. Last June, a study by the the public. Fittingly, Milwaukee’s tax revolt Independence Institute found that in the ten was set off by a scandal over massive pension years prior to its passage in 1992, Colorado’s payouts, but more recent reports suggest that state spending had grown at a rate more than Milwaukee’s pension grab, while different in twice as fast as the state’s growth in popula- scope, was not all that different from what was tion plus inflation. TABOR brought spending, happening throughout the state’s public sector. population growth, and inflation into line. Milwaukee County and the Milwaukee Concluded the Institute: “Though TABOR was Metropolitan Sewerage District, for example, part of the ‘go-go’ nineties, its measured effects both spend 50% more than the national aver- on government and non-government employ- age on employee benefits per salary dollar. ment and distribution were quite impressive. Nationally, state and local governments spend Pre-TABOR, government jobs grew slightly about 43 cents on benefits for every salary dol- more than business or total employment. After lar. In 2004, the TABOR, business job Milwaukee Public growth doubled that of Schools are expected to government job growth.” spend 55 cents for every Because of this long- salary dollar on benefits. The exponential growth term success, Michael The exponential New of the Cato Institute growth in benefits will in benefits will continue wrote in 2002: continue to put growing “Colorado's TABOR may pressure on governments to put growing pressure well surpass California's to cut services, raise taxes, Proposition 13 in terms of or modify its benefits. on governments to cut effectiveness. In 1978, TABOR would not only services, raise taxes, or Proposition 13 did an focus that pressure on excellent job of providing officials to find ways to modify its benefits. taxpayers and homeown- consolidate and stream- ers with some much line their operations, but needed short-term tax would force those politi- relief. However, since it cians to deal with the failed to restrain expendi- level of benefits rather than simply pass on the tures, the California state legislature eventual- added costs to taxpayers. ly increased other taxes to compensate for the loss in property-.” Colorado’s Fiscal Revolution Of course, TABOR is not without its critics. Wisconsin’s amendment is modeled after As the Independence Institute noted: “TABOR one adopted in Colorado in the early 1990s. enjoys a love-hate relationship. Polls show that The strictest spending cap of any state in the strong majorities of taxpayers and small busi- country, Colorado’s TABOR limits state spend- ness owners, leaders and managers love ing to inflation plus population growth, TABOR. Those who like to control and expand requires referendums for extra spending, and state spending, or are its recipient, hate it.” requires the state to refund surplus revenues. Between 1997 and 2001, Colorado’s TABOR If at first you don’t succeed. . . was responsible for rebates of $3.25 billion, or The passage of Colorado’s TABOR is a about $3,200 for average family of four. monument to the power of persistence. Efforts

Wisconsin Interest 9 to limit taxes had been on the ballot in was often called “Swiss cheese” limit “because Colorado since the mid-1960s. Tax limiting ini- it was so full of holes. TABOR supporters were tiatives were defeated with regularity: going not mollified. down in 1972, 1976, and again in 1978. Riding a tide of taxpayer anger, Douglas In 1986, a citizen-taxpayer initiative that Bruce and his supporters put Amendment 1 — would have required all tax increases to be TABOR — on the ballot once again in 1992, approved by taxpayers also failed, but won and this time succeeded, winning with 54 per- 37% of the vote. That was enough to embolden cent of the vote. It has been part of Colorado’s activists to begin a series of Taxpayer Bill of constitutional fabric since. (In 2001, voters Rights petition drives to put the constitutional approved a measure that would allow spend- amendment on the ballot in 1988. As the ing for schools to rise one percent above the Independence Institute notes, “The TABOR rate of inflation. But the rest of the TABOR initiatives brought together a strange agglom- mechanism is intact.) eration of opponents. The Six Bigs — big gov- TABOR was not designed either to stop or ernment, big business, big labor, big media, big cut government spending; its aim was to slow education and big everything else . . .” suc- that growth. And in the years since it went into ceeded in blocking the first TABOR amend- effect it has done just that by limiting state ment — but it still was able to garner 43 per- spending to inflation plus population growth. cent of the vote. The dividends have been impressive. To the surprise of the victorious coalitions, According to the Independence Institute, since however, TABOR supporters were undaunted TABOR’s implementation: (1) private sector and put a “new, improved” version of the job creation more than doubled while govern- amendment on the ballot in 1990. Again the ment job growth held steady, (2) the average Big Six mobilized to defeat the initiative, ally- Colorado family paid $6,700 less in state taxes ing themselves with then Governor Roy during TABOR’s first decade than they other- Romer, who mobilized all the power of his wise would have; (3) the extreme rate of tax office to defeat the measure. As support for the and spending growth pre-TABOR has been tax limit grew, Governor Romer’s rhetoric halted. became increasingly shrill, saying that beating Despite Romer’s doom and gloom sce- TABOR was the "moral equivalent of defeating nario, notes Cato’s Michael New, Colorado the Nazis at the Battle of the Bulge." Cato’s ranks first among all states in gross state prod- Michael New recalls that Romer personally uct growth and second in personal income attacked TABOR's author Douglas Bruce, call- growth in the years 1995 to 2000. ing him "a terrorist who would lob a hand grenade into a schoolyard full of children." TABOR’s lead legislative advocate in Romer predicted that TABOR would devastate Wisconsin, State Representative Frank Lasee, Colorado’s economy, predicting that if it were cites similar statistics, noting that between passed, signs would have to be posted declar- 1995 and 2000, personal income in Colorado ing: “Colorado is closed for business.” grew 51%, more than twice Wisconsin’s rate. And while our gross domestic economy grew Once again, TABOR was defeated, but this by 72 percent in the boom years of the late time by the narrowest of margins. Despite the 1990s, Colorado’s grew by a staggering 127 governor’s apocalyptic rhetoric and the histri- percent. onics of opponents, TABOR had won a stun- ning 49.5% of the vote. Despite those successes, Colorado did experience some budget shortfalls in FY 2002- Sensing that the political mood had swung 2003, leading to cuts in a variety of program dramatically, legislators tried to appease angry and services. Some critics tried to blame taxpayers by passing a six percent spending TABOR for the budget woes, but Nancy limit, which the Independence Institute notes,

10 Winter 2004 McCallin, the director of Colorado’s Office of vices and destitute schools. In a chorus of State Planning and Budget, dismisses any link opposition, state and local politicians will whatsoever. “TABOR,” she says, “has had no insist that they ought not to be required to live impact on the state’s budget situation during within their means; and editorial writers will the past two years. Since there was no budget warn against putting government in a “strait- surplus, no rebates were triggered. Even with- jacket.” out TABOR, Colorado would have seen its rev- What may be lost in the fusillade is that for enues fall in the wake of September 11.” all of its radicalism the amendment itself is Other critics worry about the so-called surprisingly moderate, allowing for generous “ratchet effect” of TABOR which would not spending increases while accommodating allow the state to spend all of the money it will growth, and providing outlets for emergency get when revenues once again rise. But, as appropriations through voter referenda. McCallin notes, “the ‘ratchet effect’ is not new TABOR does not mandate spending cuts and and even when TABOR ratcheted down state leaves local control intact, applying roughly spending in the early and mid-1990s, the state the same rules to state government as it does prospered.” for local City Halls. The Wisconsin debate Even so, we are already getting a taste of what lies ahead. “This proposed constitutional As the debate begins on Wisconsin’s amendment,” rail the liberal activists at TABOR, both sides will recognize that the Wisconsin Citizen Action “undermines our amendment is the next Big Idea, a single stroke values on community, on democratic decision- that will change Wisconsin’s fiscal policy and making, and on the quality of our lives.” its politics for a generation or more. But TABOR supporters are not backing Because the stakes are so large, the opposi- away from the fight. Answering the charge tion will be fierce and the denunciations at that TABOR is somehow undemocratic, Frank least as incendiary as the rhetoric Colorado’s Lasee points to the provisions that require former governor Romer used to derail that voter approval for spending and tax increases. state’s TABOR. Critics will vacillate between “This is the essence of democracy,” Lasee says. dismissing TABOR as a “gimmick” and por- “It will require that elected officials explain traying it as Armageddon. As they did during what they're doing more often to the people the last budget debates, Wisconsin’s Iron they represent. If anything, this will make gov- Triangle — the bureaucracies with a vested ernment more transparent, more accountable, interest in spending, special interest advocacy and more democratic — not less.” groups, and the news media — can be expect- ed to paint the direst picture of devastated ser-

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