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Location: Nashville, Tennessee, United States

8/13/2002

Only Hilleary Favors Spending Control
It's official. Democrat Phil Bredesen - who as mayor raised taxes 42 percent on the average Nashville homeowner and much higher for many others - has come out against bringing to Tennessee the Taxpayers Bill of Rights, a simple constitutional provision in Colorado that restrains government spending in good times in order to prevent budget crises in bad times.

For good measure, the Tennessee Democratic Party - which is on record favoring creation of a state income tax - has also called TABOR a bad idea, in a press release filled with lies about how the Taxpayers Bill of Rights works in Colorado.

Today’s Chattanooga Times Free Press reports in this story by John Commins that Hilleary wants to bring the Taxpayers Bill of Rights concept to Tennessee. Bredesen and the Tennessee Democratic Party oppose it.

The Tennessee Democratic Party in a press release issued today calls Colorado's TABOR "a controversial plan ... that hinges on a statewide income tax." That's a double lie. TABOR was adopted by Colorado voters in a near-landslide in 1992, and the most recent poll in the state finds it retains widespread support today. If anything, support has grown. And although the Tennessee Democratic Party deceptively calls Colorado’s 4.63% flat income tax "the key" to TABOR, the truth is TABOR does not require or "hinge" on the existence of an income tax. TABOR works with any type of tax code.

Colorado’s Taxpayers’ Bill of Rights, or TABOR, is a state constitutional amendment that prohibits raising taxes or creating new taxes unless that is done by public referenda. If tax collections exceed the rate of inflation and population growth, taxpayers get a refund. Legislators may propose to retain surpluses but those requests are subject to voter approval. TABOR applies at the state level and also to cities and counties.

In the past decade, TABOR has resulted in more than $3 billion in surplus revenue being returned to Colorado taxpayers. Contrast that with Tennessee, where the legislature has since 1985 exceeded the constitutional cap on spending growth by $3 billion. (Click here for details.)

Tennessee Democratic Party Chairman William E. Farmer charged that Hilleary wants to "overhaul" Tennessee's tax code and replace it with Colorado's, implying Hilleary secretly admires Colorado's income tax. But the truth is Hilleary favors copying only the Taxpayers Bill of Rights provision in Colorado's constitution - a provision that has resulted in tax reductions and rebates of more than $3 billion in the last 10 years, while not inhibiting Colorado's ability to balance its budget and grow spending at a rate necessary to cover increases in population and inflation.

Hilleary told the Chattanooga paper: "We can live with growth that is the rate of inflation plus the rate of population growth."

Bredesen responded that he does not think the Colorado plan is "the right answer for the state of Tennessee." Bredesen further said Colorado's plan is "problematic in several ways," and when it comes to state spending in Tennessee, "we don’t need to be frozen."

Bredesen clearly does not understand TABOR, which doesn't freeze spending but only restrains it to a sensible level of sustainable growth. Or perhaps he does understand TABOR - but doesn't like that it would limit his ability to tax and spend. This is the same Bredesen, after all, who said for months he could "manage" the state with existing resources, but after the legislature passed a tax increase he said it would be "irresponsible" to repeal it.

Economist J.R. Clark at the University of Tennessee at Chattanooga says linking revenue growth to inflation and population growth "has worked in other states." Clark says a TABOR-type provision "serves as a very useful yardstick to guide the rate of growth of expenditures and it helps the Legislature to discipline itself and set priorities."

Clark's comments echo the findings of economist Dr. Barry Poulson at the University of Colorado at Boulder, whose extensive research into TABOR found that it caused a "smoothing" of state finances and, by restraining spending during boom times, it prevents large budget gaps from emerging during inevitable economic slumps.

The emerging debate over TABOR has certainly brought a new clarity to the governor's race. Van Hilleary supports spending restraint and giving voters more control over tax increases and what happens to revenue surpluses. Bredesen doesn't.