TABOR: Does It Work?

The state policy section of this week’s Economic Newsletter will analyze state spending caps. There is a debate emerging in Montana about statutorily restraining spending. Explains Kendall Cotton, president and CEO of the Frontier Institute, a Montana think tank (and thank you to a blog reader who recommended this article):

Debates about Montana’s budget often invoke bitter contention over spending cuts, but miss an opportunity for consensus on limiting spending growth. Most Montanans I grew up with would likely agree our government should spend within its means and not tax too much. Those who drafted Montana’s constitution wisely required governments to balance budgets for that very purpose. But balanced budgets don’t necessarily mean the taxpayer is off the hook. The sky-high property taxes burdening many Montana communities are one symptom of a larger problem: uncontrolled growth in government spending at the state and local levels.

This issue is being debated in other states as well, one of them being Colorado. Their TABOR – Taxpayers Bill of Rights – is the best known spending restriction in any state. Its fiscal core is a restriction on the growth of General Fund to the sum of the growth population and inflation. Kendall Cotton has picked up on this and wants to import that formula to Montana:

Montana budget leaders have pointed to population growth plus inflation as the fairest measure of economic growth by accounting for potential changes in demand for government services and the cost of providing them.

So does the Frontier Institute. In a report published in December last year, they called for a TABOR-style spending cap to be placed on the Montana state budget. They estimate that:

Montanans are footing the bill for a cumulative $14.9 billion more in spending than if the Legislature had increased the budget each period by this key metric.

But does this measure really work? In his article for the Cannon, Cotton uses Texas as a reference point, arguing for Montana to adopt the fiscal core from TABOR. In this week’s Economic Newsletter we will analyze the fiscal effects of TABOR in Colorado. We will also take a close look at government spending in Texas, as well as reproduce the Frontier Institute’s claims of the effects from said fiscal restraint in Montana.

Are the results what TABOR proponents claim? Should we recommend other states to follow?

The analysis and the conclusions will be available to our growing community of subscribers on Friday morning. Sign up today – only $2.99/month – and be ready to read our newsletter when it is published.

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