Taxes & TABOR

Motorists shafted by Dems' tax trick

Beginning July 1, Colorado drivers will pay higher taxes--we're told to call them "fees"--on every vehicle every year when we renew our license plates. The increase of $29 to $51 per vehicle is projected to generate $250 million annually to repair unsafe roads and bridges, Gov. Bill Ritter said when he signed the "fee" hike into law.

All this occurs under the guise of economic stimulus as Colorado Democrats learn from their Washington counterparts to strike quickly while the economy is on the ropes and the public is too worried about their own finances to pay attention to statehouse shenanigans.

To be fair, transportation funding from Colorado's fuel tax has been stagnant in recent years because it's calculated on a per-gallon, rather than a per-cent, basis. Higher fuel prices and better fuel efficiency keep total fuel consumption relatively flat. For the last 10 years, the state's share of fuel tax receipts never fell below $379 million but never grew above $430 million.

When the economy is booming, roads and bridges receive a tremendous bonus from the general fund ‹ income and sales taxes ‹ which nearly matched the fuel tax, adding $1.3 billion to the transportation budget from 2005 to 2007.

However, just hours after Gov. Ritter signed the vehicle fee hike into law, every Democrat in the state senate voted to sever this general fund lifeline to transportation.

If it sounds like Democrats are talking out of both sides of their mouths, it's because they are - at least, so far. One day, they say our roads and bridges are unsafe and demand more money from Colorado drivers. The next day, they take a hatchet to transportation funding.

Any sane person can be excused for wondering what they're drinking or smoking at the state capitol.

Sadly this is nothing new. Dating back to former Gov. Roy Romer, Democrats' favorite tactic has been to grow social welfare spending and leave transportation with scraps. Romer's approach was to tell voters that if they wanted more money for transportation, they should vote for higher taxes.

In 1997, Romer and Republicans reached a compromise that guaranteed the aforementioned bonus source of highway funding and limited general fund spending increases to no more than six percent per year.

Republican Gov. Bill Owens staunchly defended that compromise and worked out a similar agreement with Democrats in 2002.

Now that Democrats hold a monopoly at the state capitol, they seem intent upon smashing those agreements in order to boost social welfare spending.

Senate Bill 228 would eviscerate the limit on general fund spending, end a vital source of transportation funding, and allow rapid expansion of entitlements. Even Gov. Romer didn't suggest repealing this limit without the required public vote, but today's Democrats are above consulting lowly taxpayers.

The bill's sponsor, Sen. John Morse, nearly stepped in it recently when, reacting to opposition from Denver chamber of commerce, he declared, "Let's let the people's elected representatives decide that - not the chamber."

Better yet, Sen. Morse, let's let the people decide for themselves, as the constitution ­ which you pledged to uphold ­ requires.

Ironically, proponents suggest that eliminating a spending limit to facilitate more spending on social welfare will help Colorado "get out of a recession."

That's an argument with rife with economic illiteracy. If all spending limits disappeared tomorrow, state government still couldn't spend an extra dime. In a recession, it's the economy that limits spending. Moreover, Colorado's government doesn't fund the economy; the economy funds government.

If Democrats want to expand social welfare spending, they should be honest about it. If they believe transportation needs more money, they should first protect every existing resource. And if they want to repeal state spending limits, they should follow the constitution by asking the voters.

Mark Hillman served as senate majority leader and state treasurer. To readmore or comment, go to www.MarkHillman.com

Spenders aim to bust the 6%

Emboldened that the state supreme court still hasn't ruled on Gov. Bill Ritter's plainly unconstitutional property tax hike, tax-and-spenders at the State Capitol are drawing up their game plan for another end-run around voters. If they can get away with hiking property taxes by claiming it's not a tax increase, then Democrats are increasingly confident they can again bypass voters and the state constitution by claiming that a spending limit is something else.

The Taxpayers Bill of Rights (TABOR) in the state constitution famously mandates that taxes cannot be increased without voter approval. However, voters also get the final word on weakening any limits on "revenue, spending and debt."

In 2005, Referendum C suspended much of TABOR for five years and modified other portions indefinitely. However, Ref C left intact a provision that limits annual increases in general fund spending to six percent and devotes anything over that amount to roads and bridges.

Now Democrats - and one Republican - want to eviscerate that limit, too, although their justification and methods are dubious.

Even Gov. Ritter's budget office - known for its dreamily-optimistic projections - doesn't expect general fund growth to bump against the limit in the next four years.

Why then are liberals chafing at a limit that won't actually impede them anytime soon? For the same reason their counterparts in Washington turned an "economic stimulus" bill into a big-government spending binge.

"You never want a crisis to go to waste," reminds Rahm Emanuel, chief of staff to President Obama.

Taxpayers striving to keep their own financial boat afloat don't have time to worry about the minutiae of government formulas, so Democrats shamelessly use today's economic distress to dismantle anything that might slow state spending when the economy rebounds.

Spendaholics are all atwitter. "We've got to do something!" more often conceals an agenda of opportunism than of necessity.

"We don't have a spending problem, we have a revenue problem," complain activists at the liberal Colorado Center on Law and Policy. Translation: "Government can't spend enough because taxes aren't high enough."

No wonder they don't trust the voters.

Next, Jean Dubofsky, a former supreme court justice with a crafty legal mind and a penchant for legislating from the bench, proffered a clever legal strategy.

Dubofsky is no neutral observer. She's a board member of the Colorado ACLU and two liberal think tanks that despise TABOR. Her opinion suggests that the six percent limit really isn't a limit and can, therefore, be changed without voter approval.

Two Democrat legislators are dutifully parroting that message.

Denver Rep. Mark Ferrandino claims the six percent limit "doesn't actually limit the amount of money we're spending." Colorado Springs Sen. John Morse calls the six percent limit "an allocation strategy. TABOR is silent on allocation strategies."

Past legislatures and former governors from both parties have taken TABOR at its word when it plainly says: "Other limits on . . . revenue, spending and debt may be weakened only by future voter approval." Further, the constitution requires that TABOR's "preferred interpretation shall reasonably restrain most the growth of government.."

Although a spending limit of six percent is indeed arbitrary, it is hardly draconian. Yes, it could cause major difficulty in an age of hyper-inflation, but for eight of the past 10 years, six percent was more than the combined growth of inflation and population. Why then do liberals find it so oppressive?

Because expanding entitlement spending is the holy grail of the Left. More people who depend on government means more votes for the party that promises bigger government. Expanding social welfare is difficult when anything over six percent must go to roads and bridges.

It's ironic that liberals who liken government spending to "investment" now prefer to shift money away from lasting infrastructure and into social programs where more spending always begets demand for more spending.

If Gov. Ritter and Democrat legislators aren't willing to trust voters with these decisions, as the constitution requires, why then should voters trust them with their taxes?

Prosecutor outrages the Left

Action from 2/22 Radio: For breaking an ID theft ring of over 1300 illegal aliens, DA Ken Buck finds himself sued by ACLU and pilloried by the New York Times. The Weld County prosecutor and his colleague, Sheriff John Cooke, must be doing something right. Here is a partial archive of web links for state and national news coverage of the story since it broke in November.

http://www.nytimes.com/2009/02/02/us/02greeley.html?_r=1&scp=2&sq=Ken%20Buck&st=cse

http://www.greeleytribune.com/article/20081120/NEWS/811199888/1001&title=Allard%20talks%20%27Number%20Games%27%20on%20Senate%20floor

http://www.greeleytribune.com/article/20081120/NEWS/811199886/1001&title=%27Number%20Games%27%20suspect%27s%20family%20confused%20by%20arrest

http://www.noco5.com/index.aspx

Greeley Tribune

11/16/08

http://www.greeleytribune.com/article/20081116/NEWS/811159876/1002/NONE&parentprofile=1001&title=Farmers%2C%20business%20owners%20concerned%20about%20finding%20workers

Editorial

http://www.greeleytribune.com/article/20081116/TRIBEDIT/811159936/1029/NONE&parentprofile=1025&title=Immigration%20reform%20long%20overdue

11/15/08

http://www.greeleytribune.com/article/20081115/NEWS/811159958/1002/NONE&parentprofile=1001&title=Officials%20hope%20arrests%20lead%20to%20widespread%20change

http://www.greeleytribune.com/article/20081115/NEWS/811159994/1002/NONE&parentprofile=1001&title=ANALYSIS%3A%20Federal%20policies%20hinder%20immigration%20enforcement

http://www.greeleytribune.com/article/20081115/NEWS/811159996/1002/NONE&parentprofile=1001&title=New%20immigration%20rift

11/14/08

http://www.greeleytribune.com/article/20081114/NEWS/811139961/1002/NONE&parentprofile=1001&title=Weld%20cracks%20down%20on%201%2C300%20ID%20theft%20cases

http://www.greeleytribune.com/article/20081114/NEWS/811149962/1002/NONE&parentprofile=1001&title=ID%20THEFT%3A%20Arrested%20so%20far

http://www.greeleytribune.com/article/20081114/NEWS/811149949/1002/NONE&parentprofile=1001&title=ID%20THEFT%3A%20Understanding%20the%20tax%20ID%20number

http://www.greeleytribune.com/article/20081114/NEWS/811149947/1002/NONE&parentprofile=1001&title=ID%20THEFT%3A%20Examples%20of%20returns

http://www.greeleytribune.com/article/20081114/NEWS/811149974/1002/NONE&parentprofile=1001&title=ID%20THEFT%3A%20By%20the%20numbers

http://www.greeleytribune.com/article/20081114/NEWS/811149942/1002/NONE&parentprofile=1001&title=Woman%20finds%20herself%20a%20victim%20

Television

11/14/08

Channel 5

http://www.noco5.com/story.aspx?ID=471&Cat=2

Channel 9

http://www.9news.com/rss/article.aspx?storyid=103992

http://www.9news.com/news/investigative/article.aspx?storyid=103852&catid=207

Channel 7

http://www.thedenverchannel.com/news/17992968/detail.html

Channel 4

http://cbs4denver.com/local/illegal.immigration.greeley.2.864743.html

Channel 2

http://www.kwgn.com/pages/news_local_landing/?Weld-Co-probe-focuses-on-illegal-tax-ref=1&blockID=134747&feedID=202

Longmont Times-Call

http://www.timescall.com/print.asp?ID=12168

Boulder Daily Camera

http://www.dailycamera.com/news/2008/nov/16/1300-could-be-arrested-in-immigrants-tax-scam/

CNN LOU DOBBS

http://www.cnn.com/video/#/video/bestoftv/2008/11/14/wian.bb.identity.theft.scheme.cnn

KKTV

http://www.kktv.com/home/headlines/34456909.html

NFIB: The Voice of Small Business

http://nfibelection2008.illumen.org/newsArticle.jsf?documentId=2c9e4f691d9ef3f3011da0d0a75f01eb

Free Republic

http://www.freerepublic.com/focus/f-news/2133235/posts

Americans for Legal Immigration

http://www.alipac.us/modules.php?name=Forums&file=viewtopic&t=138238

Colorado Springs Gazette

http://hosted.ap.org/dynamic/stories/C/CO_IMMIGRATION_TAXES_COOL-?SITE=COCOL&SECTION=HOME&TEMPLATE=DEFAULT

Denver Post

http://www.denverpost.com/news/ci_10989583

Rocky Mountain News

http://www.rockymountainnews.com/news/2008/nov/14/weld-county-investigating-1330-tax-files-for/

MSNBC Message Board

http://boards.msn.com/MSNBCboards/thread.aspx?threadid=193977&boardsparam=Page%3D3277

Minuteman HQ Forum

http://forum.minutemanhq.com/phpBB2/viewtopic.php?f=13&t=18525&sid=c3696ee1597ff3a87e94ad5fedf4c425

AARP Bulletin Today

http://bulletin.aarp.org/states/co/articles/analysis_federal_policies_hinder_immigration_enforcement.html

United for A Sovereign American

http://immigrationbuzz.com/

http://www.9news.com/news/article.aspx?storyid=103852&catid=188

http://www.thedenverchannel.com/news/17979255/detail.html

http://cbs4denver.com/local/illegal.immigration.greeley.2.864743.html

http://www.rockymountainnews.com/news/2008/nov/14/weld-county-investigating-1330-tax-files-for/

Other states envy TABOR

(Denver Post, Feb. 15) How dumb do they think we are? The state is in a $600 million hole because Gov. Bill Ritter and Democratic legislators ignored advice from Republicans – and even some fellow Democrats – to restrain spending and save for a rainy day. Now those same spendthrifts want us to remove constitutional guardrails so they can rev the budget again when good times return. Family budgets are breathing easier, after Ritter and former Speaker Andrew Romanoff got spanked by voters on three tax increases last November – Amendments 51, 58, and 59. But we’re taken for suckers on this too. Dem leader Paul Weissmann already talks of “floating an issue back to the voters” that would goose revenues and gut the Taxpayer’s Bill of Rights (TABOR). Meanwhile, a judge has red-flagged the governor for raising property taxes $120 million without taxpayer approval as constitutionally required. The state Supreme Court hasn’t yet ruled on this money grab, but the spending lobby must expect to win. They’re now brazenly planning another evasion of TABOR without citizens’ permission – this time to bust the 6% general fund growth limit. Sue them if you dare.

The Taxpayer’s Bill of Rights, part of the Colorado constitution since 1992, states that “its preferred interpretation shall reasonably restrain most the growth of government.” That means we the people get the benefit of the doubt. Gov. Ritter, Sen. John Morse and other Democrats, Rep. Don Marostica and other Republicans, are all sworn to support the constitution. Have they forgotten?

They give off an air of casualness toward that oath of office, impatience if not scorn for TABOR and its limitations, and ill-concealed disdain for the millions of Coloradans who don’t know what’s good for us in terms of rosy scenarios, free-wheeling fiscal policy, and a “trust me” approach to government. Their track record forfeits our trust.

“Trust me” became California’s fiscal motto back in the ‘80s, after their voter-approved tax and spending limit was undone by education mandates. (Sound familiar?) The state is now $42 billion in the red and Gov. Schwarzenegger has ordered furloughs. He has wished aloud for something like TABOR to stop the madness.

Taxpayers in many other states share Arnold’s wish, as I recently confirmed with an hour of phoning. Budget analysts from Tempe to Kennebunkport, unless they’ve drunk the big-government Koolaid, endorse the wisdom of a population-plus-inflation growth formula, tempered with flexibility and recession reserves. They say people here should realize how fortunate we are.

“Watch out, Colorado. Without TABOR you could end up like Ohio,” warns David Hansen of the Buckeye Institute in Columbus. He describes a “generation-long spending spree” that has turned their low-tax, high-growth state into one with high taxes and no growth, “totally uncompetitive in the 21st century.”

Reports are similar from neighboring Pennsylvania and distant Arizona. Spending grew twice as fast as population plus inflation in both states since 2002, leaving them today with deficits far worse than Colorado’s. Absent fiscal guardrails, politicians “rode the revenue roller coaster sky-high, then crashed with it,” citizen lobbyist Tom Jenney told me from Phoenix.

TABOR may pass this year in Maine, polls suggest, after Democrats spent recklessly following defeat of a 2006 proposal. Oklahoma fiscal reformers have similar complaints and hopes. Ken Braun of the Mackinac Center observes that spending limits and rainy-day provisions after 1995 would have spared poor Michigan its budget agonies since 2002.

How irresponsible for Colorado’s philosopher kings to propose trading our prudent discipline for these nightmares. Delivered from temptation, a character in Bunyan exclaims: “Then it came burning hot into my mind, whatever he said, and however he flattered, when he got me home to his house, he would sell me for a slave.” Nothing personal, but we should likewise hotly distrust the TABOR-busters.

Four objections - and a better way

America is at a crossroads. Congress, pressed by President Obama to act quickly to prevent “catastrophe,” is on the verge of spending more than $800 billion on a “fiscal stimulus package” intended to jumpstart the economy, with roughly $300 billion in tax rebate checks and $500 billion in infrastructure spending. Hundreds of economists, however, have expressed their deep concerns about the government’s plan for dealing with the recession, and a review of the effectiveness of such policies as those proposed reveals the folly of tax rebates and government spending as fiscal stimulus.

1. Tax rebates do not boost consumer spending. According to economist Martin Feldstein, CEO of the National Bureau of Economic Research, when tax rebates went out as economic stimulus last spring, only around 16% of the checks were actually spent, with nearly five times that amount going into savings. Most of the rebates were used to pay off loans, not to buy new products and services, and the stimulus package utterly failed to preclude the recession.

In 2001, tax rates were reduced and tax rebates went out to make up the difference. While the economy improved after the tax changes, evidence suggests that the rate reductions, not the rebates, did the trick. A late-2001 study conducted by economists Matthew Shapiro and Joel Slemrod of the University of Michigan and NBER found that only 22% of those households receiving stimulus checks spent the money.

Furthermore, by the time the checks would be in the mail, the economy may be improving, as happened, according to Steven Weisman and Edmund Andrews of The New York Times, in the 1970s. If implemented now, the benefits of a tax rebate stimulus—a small burst in increased consumer demand—are minimal at best and will not outweigh the substantial costs.

2. Faulty policy is not worth the debt risk. While the value of the dollar has lately gained in strength, it still has the potential to continue its recent decline. As its value goes down and creditors like China see their own GDPs shrink, creditor concerns over their holdings of U.S. bonds will rise, resulting in the likely increase in interest as they rethink their holdings. By spending $800 billion on a stimulus package that will likely have minimal effect, the U.S. government is essentially assuming even more debt, which is already at $10.7 trillion, at greater national risk.

3. Infrastructure projects will not work. Obama intends to spend around $500 billion on infrastructure projects and public works programs, including transportation projects, intended to create jobs and boost consumer confidence. Yet when Herbert Hoover and FDR tried such programs in the 1930s to tackle the Great Depression, unemployment remained in the double digits up to World War Two, averaging at 17.2%.

According to the Heritage Foundation, federal spending rose from “3.4% of GDP in 1930 to 6.9% in 1932 and reached 9.8% by 1940. That same year—10 years into the Great Depression—America's unemployment rate stood at 14.6%.” In sum, massive increases in government spending did not result in noticeable economic improvements.

Even if infrastructure spending were to have positive effects, an early analysis of the Congressional Budget Office found that just 7% would be spent by next fall, with only 64% reaching the economy by 2011—likely after the country has entered into recovery.

4. Japan’s “lost decade.” Japan’s “lost decade” of economic growth of the 1990’s presents an excellent case study for the suggested package. Over a period of seven years, the government implemented eight different, large stimulus packages much like Obama has proposed.

According to The Wall Street Journal, during the 1990’s, the Japanese government, faced with many of the problems we are confronted with today, tried giving out loans to businesses, boosting infrastructure spending, buying bad assets off of banks and distributing tax rebates, among other Obama-esque policies.

These policies resulted in an increase in Japan’s debt-to-GDP ratio from 68.6% in 1992 to 128.3% in 1999. In essence, government spending in Japan skyrocketed in ways very similar to Obama’s proposals, yet the economy did not experience noticeable improvements until the current decade.

5. An alternative proposal. The government must instead institute wide-ranging, permanent, pro-growth tax rate cuts, starting with making the Bush tax cuts permanent and expanding them. Beginning in 2010, the Bush rate reductions on income, capital gains (investments) and the estate tax will start to dissipate. With the dire need for capital injections into the market, allowing the 15% capital gains rate to return to the 20% rate would discourage investment in the economy. Instead, the capital gains tax should at least be cut in half to 7.5%, if not temporarily expunged for all investments begun this year and kept for no less than two years, so as to incentivize greater investment.

Former House Speaker Newt Gingrich has proposed that the 25% income tax rate be reduced to 15%, thereby “establish[ing] a flat-rate tax of 15% for close to 90% of workers.” Such targeted tax cuts would give the economy the boost it needs to create jobs and increase consumer demand and investment. We must then slice the corporate tax rate from 35%, the second-highest in the world, to 25%, the average in Europe. This would expand incentives for businesses to create jobs in America and lessen the enticement to outsource.

If the Bush tax cuts expire, taxpayers will reduce spending in anticipation of the expirations, stunting the benefits of the rebates further. Alternatively, the knowledge that tax rates will be cut and individuals will be permitted to keep more of their income will give a sense of comfort to the beneficiaries.

By cutting marginal tax rates now, the short-term effect will be a rise in consumer confidence, resulting in a boost in consumer spending. The long-term relief that came in the form of broad-based tax cuts in 2003 resulted in the largest single-quarter GDP growth in 20 years, 7.2%, and the creation of 8 million new jobs through 2007.

The president has disappointingly labeled such contentions against his plan “old,” “phony,” “worn out” and “tired.” Yet history has shown that the net benefit of such stimulus packages is minimal, and he who does not learn from history is doomed to repeat it.

A fiscal stimulus of tax rate cuts, not tax rebates or infrastructure spending, would stimulate an economic recovery by putting more money in people’s pockets long-term and increasing demand in the short-term. That is the kind of economic policy that would do America the most good.

Jimmy Sengenberger is a political science student at Regis University in Denver, a 2008 honors graduate of nearby Grandview High School, a national organizer for the Liberty Day movement, online radio host, and a columnist for the Villager suburban weekly. He is also College Liaison for BackboneAmerica.net, working through the Backbone Americans group on Facebook.