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In the tax debate we often hear about what state government can afford. This is ironic! What legislators really mean is “How much of the taxpayer’s money can we spend?”
We need to control government spending in Maine; we need a tax and expenditure limitation policy (TEL). The majority of states have such a policy and it is based on something more rational than Maine spending whatever money comes in.
Unlimited spending in Maine, particularly over the past decade, has fueled our current budget problems. Maine’s government spending throughout the 1990’s outpaced the growth in Maine’s annual income growth as well outpacing inflation. In other words, government expanded.
The best defense against future out of control spending is an automatic political restraint. If the people of Maine are serious about this, they need to limit what the politicians can do with their money.
Passing a law to limit spending can too easily be reversed. As a matter of fact, in the mid 1990’s the Maine legislature passed a spending policy limiting the growth in state spending to 3% annually. The next legislature repealed that law, and spending exploded.
In the boom years that followed, the income tax and capital gains tax flooded that state with money, and it was spent. And what was put aside in a rainy day fund was raided when the first cloud appeared on the horizon.
Legislation is not the answer. Only a constitutional amendment can offer permanent protection, because laws govern people, but constitutions rule governments.
Over the past 30 years many variations of the TEL have been tried, and the most successful have the following characteristics:
* Constitutional and initiated by the people
* Spending limited to growth in population and inflation
* Applies to all levels of government
* Revenue above the limit rebated quickly and from whence it came
* Super majority required for any increase in taxes, fees or debt at the state or local level
The majority of the states have some variation on these concepts, so we have decades of experience with what works, what is too easily circumvented, and what is essential for prosperity.
Colorado has the spending policy that has fostered real prosperity since it passed in 1992. Their Taxpayer’s Bill of Rights (TABOR) didn’t stop governmental growth, it stopped excessive growth. In addition, through the past decade TABOR has had a stabilizing impact on state revenue and spending over the business cycle.
The Colorado tax burden has dropped and per capita personal income has increased. It had the 26th highest tax burden 1992, dropping to 32nd by 2003 (Tax Foundation). Per capita personal income rose to 8th highest in the country by 2002, up from 14th in 1992 (Bureau of Economic Analysis). The burden of taxes went down and income went up.
In the decade prior to TABOR state government spending grew more than twice as much as growth in population and inflation. In the decade after TABOR state government spending grew in line with population and inflation, 64% growth in government vs. 63% population-inflation, and this was during the go-go years of the 1990’s. More importantly, the rate of private job growth doubled in the decade after TABOR and Colorado experienced one of the most rapid rates of economic growth in the country.
As Maine struggles to find prosperity, the success of Colorado is a beacon in the night, and is showing us the path to follow. Maine clearly needs to pass a carefully crafted constitutional tax and expenditure limitation amendment to enjoy the prosperity of limited government growth.
We have the power to end our current economic death spiral. We can change policy and change toward prosperity; reducing poverty, creating jobs and making a place for future generations in our great state.
Betsy Chapman is board chair of the Maine Public Policy Institute in Bangor, with grown children living out of state who would like to come home.