Council Think About Taxes?

The following was an editorial sent into the Missourian asking what the city council thinks about taxes. I have included my response in the form of a letter to the editor which has yet to be included in the Missourian:

What Does the Council Think About Taxes?

By: John Ritson Sr., A Senior Citizen

01/13/2009 e

To The Editor: Let’s hear from the council people!! As most of us taxpaying property owners are disgusted with the “unfair” taxation on devalued property and seemingly lack of concern by those in charge, we should hear what our council people think about the present situations. After all, if they truly are thinking about and representing their constituents of the four wards in Washington, I feel we have the right to know how they feel about an unfair practice, even if it is required by a stupid law. Hopefully, they haven’t forgot what most of us learn in American History classes, something called the cry of “taxation without representation!” So, before we start hearing about the next local election, maybe we might just get some insight on how these council people think about fairness when it comes to the process of levying taxes.

My response, January 14, 2009:

Dear Mr. Ritson, Sr

I certainly can empathize with your feelings that keeping property tax rates steady in the face of falling property values is “unfair.” Unfortunately, some citizens feel that government should provide our cradle-to-grave needs. This philosophy comes at a price. When the economy is doing well, this works OK, but when the economy falters the tax payer and business owners get pinched.

The reality is that per every $100 of assessed property value, $5.89 is the total tax levy. Of that total amount 68 cents goes to the City of Washington – the only amount your elected city council person has control of. $3.86 of the tax goes to the school district – by far the lions share of all property taxes. As you can see, our portion of the total pie is but a fraction of the full about. Of the City of Washington’s portion, 15 cents goes to the Fire Department, 9 cents goes to the Library, and the remainder goes to the General Fund for operating the city.

Regarding the setting of the 2008 tax levy, the City Council was split down the middle on voting in the new tax levy. I voted against setting the levy at 100%, along with 3 other of my colleagues. (The eMissourian is an excellent resource for searching city news. To read the entire story, search the eMissorian for: “Mayor Breaks Tie to Set ’08 Tax Levy, By Ed Pruneau, Missourian Managing Editor 08/19/2008.” ) But I can say with confidence that the Mayor, City Staff, and City Council remain vigilant in protecting tax dollars and have recently come up with new ways to increase the efficiency of government operations.

From my perspective and limited control, you are receiving a pretty good value for your property tax dollar. We have a premier Volunteer Fire Department, Water Department, Sanitation Department, along with streets, parks and the library. We have some of the cheapest and cleanest water in the nation. We have a state-of-the-art water treatment plant that will come on line very soon that can scale to future growth for a generation or more.

And no I am not up for re-election.

Sincerely yours,

Guy W. Midkiff
Ward III, Councilman
City of Washington

Published in: on January 17, 2009 at 10:11 pm  Comments (1)  

• My Political Philosophy

Guy W. Midkiff
2-29-08
Political Philosophy

1.jpgTraditionally, prospective and active City Councilpersons do not declare their allegiance to one political party or another. As many may have noticed, I am waging a very untraditional campaign. I am the first candidate in Washington to ever communicate directly to the voter by means of a blog. I am clearly about communication, this is why I speak to my prospective constituents directly through this medium.

If you vote for me, I want you to know exactly what I stand for and what you will get, if I am elected. I want there to be no question about my leadership style and political philosophy. I believe in forming alliances at city hall, but I reject the idea that I will support the mayor out of a sense of “harmony,” as the local newspaper put it. My sense of duty and “harmony” is to my constituents – end of story. My leadership style was molded in the Marine Corps and has been sharpened as a TWA and American Airlines Captain, holding previous elected office in New York City, and Washington business owner.

My philosophy is simple – conservatism. I have lived in almost every major city in this country and also two countries in Europe. I have seen first hand what unchecked government can do to businesses and the public. My motto is also simple: Less Government, Less Taxes, and Less Government Regulations.

The following are some of my core conservative principles:

* A conservative believes in the motto quoted by Henry David Thoreau, “That government is best which governs least.” A conservative’s vision of government was put forth by Thomas Jefferson: “a wise and frugal government, which shall restrain men from injuring one another [and] shall leave them otherwise free to regulate their own pursuits of industry and improvement.”

* A conservative believes that individuals and families are the basic units of society, and that anti-family policies (such as the current ultra-high tax rates on working families) should be ended.

* A conservative believes that, however unattainable the goal of moral perfection, people should strive to put morality and their families ahead of other concerns in their lives.

* A conservative has compassion for the poor and opposes policies, such as those based on socialism and on opposition to new technology, that cause or extend poverty.

* A conservative believes in the free trade of goods and services, but rejects the mercantilism (“welfare for corporations”) that masquerades as free trade.

* A conservative believes that great weight should be put on the wisdom expressed in the founding documents of Western civilization and American society, including the Bible, the Declaration of Independence, and the U.S. Constitution with its Bill of Rights.

* A conservative believes in the Rule of Law – that a law means what it says, as the language of the law was understood when the law was written. A conservative rejects the idea of a Living Constitution, under which lawyers and judges can change laws by undemocratic means. If judges are allowed such power, Jefferson noted, the U.S. Constitution “is a mere thing of wax in the hands of the Judiciary, which they may twist and shape into any form they please.”

* A conservative believes that public policy should encourage advancement based on ability and achievement, not on membership in an actual or concocted group.

* A conservative understands that “the public interest,” as determined by governing elites, is not the public interest – that, not surprisingly, it represents the interests of the governing elites.

* A conservative has respect for those who have made sacrifices in the cause of freedom, and for those who put their lives in peril to protect others. A conservative has respect for people who work hard and play by the rules.

* A conservative sees the United States of America as a special place because of its history as a beacon for freedom-loving people from around the world. A conservative believes the United States is blessed by the presence of people from countless nations and cultures when those people are hard-working, law-abiding, and eager to interact with other Americans through a shared language.

A person does not have to adhere to a strict set of political principles to meet my definition of conservative. One of the characteristics I associate with true conservatives is that they believe in free argument and debate, not unthinking uniformity of opinion.

Finally:

* You cannot bring about prosperity by discouraging thrift.
* You cannot strengthen the weak by weakening the strong.
* You cannot help little men by tearing down big men.
* You cannot lift the wage earner by pulling down the wage payer.
* You cannot help the poor by destroying the rich.
* You cannot establish sound security on borrowed money.
* You cannot further the brotherhood of man by inciting class hatred.
* You cannot keep out of trouble by spending more than you earn.
* You cannot build character and courage by destroying men’s initiative and independence.
* And you cannot help men permanently by doing for them what they can and should do for themselves.

-William J. H. Boetcker

• Time For A Change!

guy-pic.jpg
Guy W. Midkiff
2-23-08
*****

Washington, Missouri is a well-kept secret, nestled on the banks of the Missouri River. It is a special city that traces its rich heritage back to German immigrants that saw similarities to their old country. They left Germany for a fresh chance and new opportunity – it was time for a change away from their old country.

 

Now more than ever, it is time for a change in Washington, Missouri. Many of our aspiring national candidates are using the phrase, “Time for a Change.” Citizens of Washington have been saying so for several years now, that is is truly “Tme for a change.”

 

But unlike those national candidates, I quantify what change really means. Change just for the sake of change is not always a good thing.

 

Our city budget has grown at a breathtaking 100% in less than 7 years. In the exact same time span, the total gross income, raked in by Washington, Missouri, has grown by an eye-popping 200%. I ask you, have you seen a 200% improvement in Washington? Has unchecked government spending made your life anywhere near 200% better? The answer that I have heard, without exception, is “NO.”

 

Has our population grown at anywhere near the 200% rise in city income? No. The population over the same time frame has grown by 6%.

 

Change means rolling back tax levies to the maximum extent possible every year. It means spending your money smartly and not on wasteful schemes such as the recent $36,000 light pole fiasco. It means using windfalls intelligently and not used as patronage programs or plowing the funds back into the ever-expanding city budget. Change means seriously considering how we are doing business at city hall and what areas wastefully overlap into other departments. We must do a better job prioritizing expenditures and realizing we don’t get everything on the wish list.

 

Many feel that the opportunities that attracted the original founding families here only exist now for a select few. I am a firm believer in capitalism and growth – smart growth. My experience with government has proven that governments will take every penny from the taxpayer that they can. I have also learned that governments must differentiate themselves from corporate America and cast off any such ties. The closer this unholy alliance becomes, the greater the temptation and ability there is for tax payer dollars to end up in corporate welfare schemes. A perfect example of corporate welfare, at its worst, is Washington Regional Airport. The taxpayers have already dumped $7 million down this bottomless pit and city officials are preparing to dump another $8 million.

 

And why are we doing it? That is a good question and I am still looking for an answer. What I know is that we pay $48,000 annually to manage an airport that has no: airplane rentals, no airplane school, no airplane maintenance, no charter service, no freight service, no skydiving club, no airplane rides, nothing but hangar space for the manager to keep his private airplane and hangar space for some other privately owned aircraft. Corporate welfare is scant justification to spend millions of taxpayer dollars on a community airport that should remain just that, a community airport.

 

So, how can you do your part in my campaign slogan of, “It is time for a change!” You can use the power given you by the Founding Fathers and our Constitution, you can vote.

• Windfalls

pigout3thumbnail.jpg
2-10-08
Guy W. Midkiff
*****

In December, 2007, the city of Washington reported an unexpected windfall of $420,000 as a result of resolved telecom litigation.

The funds will be used for:

1) Merit Pay Raises Reinstated for city employees, $115,00 (Click here for full story in local news paper).

2)”Relieve pressure on the city budget.”

One of the issues that I hear from people in Ward 3 is that they want to keep their children in the city they grew up in, after finishing school. Others want to have more volunteerism in the community.

What if we offered incentives for our children to return to our hometown after finishing college. We could offer scholarships, grants or special loans that budding entrepreneurs could use to invest in the community in new technology companies, medicine, or engineering, instead of being held corporate hostage to large companies that demand airports and other freebies before they agree to move here.

And instead of using the money in ways that some have described as patronage programs for city employees, we invest in new volunteer programs such as one that could make sure our seniors and handicapped are looked after.

It is worth debating whether or not more consideration should have been given to doing more with “our” windfalls than using it to feed the government.

Remember, government works for you, not the other way around.

• Status Symbols?

2-10-08
Guy W. Midkiff
*****

Infrastructure is the underlying foundation or basic framework of a system of public works.

Prioritization is the listing or rating of projects or goals in order of priority.

Cities set budgets because it is a method of setting spending limits on limited resources. Cities prioritize these expenditures so that the limited taxpayer funds are spent intelligently and in a way that serves the greater good of the community.

Washington, Missouri’s infrastructure is not so highly evolved that public works can be ignored in lieu of vanity expenditures. When I see $36,000 in taxpayer money being thrown away on vanity light poles, it worries me that we may have lost focus of our priorities and adherence to fiscal discipline.

A community airport at Washington Regional Airport makes perfect sense. But we are told that $650,000 spent on our airport is smart because the government (a euphemism for you and me – other peoples money) is kicking in $6.5 million dollars. Does anyone ask “Why?”

Who is now or will in the future, be using an airport that can justify a price tag that is about to go past $14 million? The airport has no flight school, no aircraft rentals, no glider club, no sport diving club, no flying club, and no maintenance facility – just hangars with airplanes parked in them. All the while, we are spending $48,000 annually to “manage” the aerodrome?

And what about the carrying costs? That price tag is somewhere north of $160,000 annually. This does not even take into account what that price would jump to if the airport, heaven forbid, had to actually pay interest and principal on $6.5 million. That payment would add another $600,000 per year to the cost of operations.

carrotstickjpg.jpgAnd the big orange carrot on the end of the stickstatus symbol and the “hope” that some large corporation will pick us for a dance at prom night. The latter of which is popularly known as “Corporate Welfare.”

The federal government has a poor record of picking industrial winners and losers, so the economic benefits that these programs are purported to create inevitably fail to materialize. Furthermore, corporate welfare programs create an uneven playing field; foster an incestuous relationship between business and government; are anti-consumer, and anti-capitalist; and create a huge drain on the federal budget.

The most efficient way to promote economic growth in America is to reduce the overall cost and regulatory burden of government. Ending corporate welfare as we know it would be a significant first step toward that goal of reducing the cost of government.

• My “Agenda”

2-7-08
Guy Midkiff

Yesterday I spoke at the Republican Woman’s Club, here in Washington, Mo. It was my first real opportunity for the public to hear what I stand for and the passion that I have for our Democracy.

All three contested Wards had the challenging candidates at the luncheon and gave speeches. Unfortunately two Wards (1&2) had their incumbent candidates last minute no-show.

Carolyn Witt, Ward 4, unchallenged in her Ward, did make an appearance. I thought Mrs. Witt displayed extraordinary class and leadership making an appearance she certainly did not have to attend. In the matter of fact, she stole the show from the candidates as she fielded questions regarding the new automatic traffic cameras. Most citizens were quite confused at some of the particulars of how the cameras operate.

Also a no-show was the local news paper – we missed you!

If you would care to read the outline form of my speech, I have uploaded it just below this post.

Now, why did I entitle this post, “My Agenda?” Apparently the talking points given to my opponent, who has never met me, feels that I may have and agenda, an ax to grind, to be exact, or that I am even “mad.”

I shamelessly admit it, I do have an agenda, I have an ax to grind and I am mad (well, not crazy mad, just Irish mad.) I am mad about the growth of our city government, I am mad about the amount of taxes the city is raking in and I am mad as heck at how much money they are spending and what appears to be difficulty demonstrating fiscal restraint.

I have an ax to grind, too. It’s a tax ax, to be precise and I want to grind it down until it stops cutting the citizens of Washington.

My agenda? Less taxes, less government, less regulation. It’s just that simple.

Sincerely yours,
Guy W. Midkiff

• Washington Womens Republican CLub: Speech

2-6-08
Washington Womens Republican Club
Candidate Speech
by Guy W. Midkiff
guy-pic.jpg
*****************

1. Guy Midkiff, Running for City Council, Ward 3, I hope to spend the next five minutes convincing you why a vote for me is a vote for the future of Washington.

2. Let me begin by extending a warm thanks to Annette Johnson and the Washington Federated Republican Woman for making this Luncheon possible. This is a much-appreciated Forum and is a fantastic opportunity for my fellow candidates and I to present ourselves to the voter.

3. My goal is to contrast myself against my opponent and impress upon you my resolve and leadership ability to take Washington into the future.

4. I found out there are two kinds of people opposed to paying taxes: Men and Women.

5. My Campaign slogan is “TIME FOR A CHANGE.” My Core belief comes from the ideas of: Less Government, Less Regulation, and Less Taxes. America must be reminded of what our Founding Fathers knew as an absolute: The more government we have the less freedom we have.

6. Washington is at a crossroad. The frustration I hear, when speaking with people in my Ward tells me they have had enough and that they are hurting. Families are being foreclosed out of their homes at rates not seen in decades as their American Dream Fades. To make matters worse, our economy is teetering o n the edge of a full-blown recession. And whether it be $36K Vanity Light Poles, $6 million dollars airport expansions or questionable real-estate purchases by the our school system, the time has come for us all to say enough is enough.

7. Let’s put this unchecked expansion into the proper context: Population growth in the last 7 years 6%. The City budget, in same time period, has grown 100% from $18M to $49M. The Gross Revenues taken in by the City has grown 200% , from $18M to an estimated $60M in 2008.

8. Ask yourselves: • Has the benefits to you, as taxpaying owner-operators of Washington, justified this historic grow in budgets and tax revenue? • Would you run your household finances the way Washington has conducted theirs? As homeowners, we know what happens when we over extend ourselves – buying a Mercedes when a Ford will do just fine, Taking a trip to Hawaii when a trip to the Lake of the Ozarks would be vastly more pratical.

9. Let me make this pledge today: My boss will always be my CONSTITUENTS. You will be my boss and I will answer only to you.

10. I have the experience necessary to do the job by virtue of my education in economics or my previous position in elected local government or my business ownership experience. I am intimately familiar with how a government operates and I have a proven tracking record not only managing budgets but also insuring every penny is squeezed from the taxpayers dollars.

11. Here is a simple method of reducing government spending – Reduce the money we send them. Stop feeding the beast so much of what they are addicted to – taxes. Put the tax beast on a diet and see what magical efficiencies appear from supposed “Cut to the bone” budgets.

12. Quals:
• Have been and am a business owner.
• I rose to the rank of Major in the Marine Corps and was also a Marine Pilot and oversaw multimillion-dollar budgets.
• Elected City Council, Roosevelt Island.
• I have been an advocate for WWII veterans.
• I have been a mentor for troubled youths

On Volunteerism and Community Envolvement:
• My boy attends SFB where we are active volunteers in various fund raisers such as trivia night, fund raising committees and I take enormous satisfaction in being able to offer free photography services each year as a class photographer for fundraising for SFB.

• My girl goes to Washington West where my wife and I are weekly classroom volunteers and I am on the Traffic Committee.

• So you can see, ladies and gentlemen, my wife and set the example for our children by deeds and actions.

13. I will not be hesitate to ask tough questions. With my business background, I will be able to analyze complex issues and not depend on others to show me how to vote on issues. I will not hesitate to question why $36K is being spent of vanity Light Poles, Why $6M was spent on an airport expansion that apparently doesn’t even come close to justifying the cost. Another example, Can we justify Camp Street Bridge. Why was a recent $420K windfall from telecom litigations not rebate back to the rightful owners – you the taxpayer? Instead that money went into the City’s coffers.

I will support: Infrastructure investments: The Police and Fire Departments and quality of life investments.

Thank you for your time and hope to see you on April 8th, at the poles.

* Hancock Reform Legislation

By Stephen E. Sowers
Published: Tuesday, January 29, 2008 11:10 PM CST
E-mail this story | Print this page

A property tax reform package presented by Senate Leader Mike Gibbons would, among other things, protect taxpayers from back door tax increases under the veil of reassessment.

Senate Bill 711 will also close tax loopholes with truth in taxation, require advanace notifications for more predictable assessments and tax bill increases and expand tax relief for low-income seniors and the disabled.

A Republican from Kirkwood, Gibbons told the Senate Ways and Means Committee earlier this week that “we must protect taxpayers from tax increases caused by reassessment.”

Senate Bill 711 mandates that all taxing jurisdictions, regardless of whether they are operating at or below their tax rate ceiling, must roll back their tax rate to counter reassessment increases. The measure would keep homeowners from being taxed out of their homes. The bill puts teeth back into the Hancock Amendment to protect taxpayers.

The bill also increases the senior citizen property tax credit award from $750 to $1,100.

The full text of SB 711 can be found on the Web at: http://www.senate.mo.gov and doing a keyword search for SB 711.

LIONS TO HEAR EMERSON: U.S. Rep. Jo Ann Emerson, whose district includes Phelps County, will speak at the Thursday noon luncheon meeting of the Rolla Lions Club.

The club meets at the Lions Den, 1061 South Bishop Ave.

Emerson announced Monday that she has decided not to seek the Republican nomination for governor in this year’s election. She will, however, be a candidate for reelection to her seat in the House.

On another subject, Emerson said Tuesday following President Bush’s State of the Union address Monday night that “this year we should underscore the basic importance of working together across party lines to improve our standard of living at home and our stature aboard.

“On some issues there can be no progress without cooperation; we must negotiate a Farm Bill that gives American producers a level playing field in the global marketplace while keeping a safe, affordable supply of food on our store shelves.

“On a second important issue, we must identify the needs of the Baby Boom generation and devise a plan to meet them starting with access to health care.”

Emerson also said she was very pleased that President Bush addressed the sweeping problem of global hunger. But she emphasized that instead of sending money to starving nations we should send food. “U.S. food aid puts bags of food in towns and villages in every corner of the world, and each bag says ‘Gift of the people of the United States of America.’ Food has a dramatic advantage over cash as food can only be eaten. Money can be diverted, mismanaged, abused and dangerous to local economies in hundreds of ways in which food commodities cannot.”

Emerson, by the way, on Tuesday voted in favor of the economic stimulus package that advanced through the House. She said the package was neither perfect nor complete, “but does immediate, measurable good.”

BLUNT’S CALL: Gov. Matt Blunt Tuesday called on the General Assembly to pass legislation to ensure Missourians will not have to pay state taxes on tax refund checks related to the federal economic stimulus package being debated in Washington.

The money should go directly to Missouri’s hardworking families, Gov. Blunt said. “I am asking our elected representatives to send me a one-time bill exempting any one-time federal income tax rebates from state taxes.”

On the same subject, Attorney General Jay Nixon warns that con artists are already at work, calling Missourians and asking for their Social Security number in order to trick eager consumers into thinking that will expedite the refund process.

Nixon said consumers should hang up on any such phone calls or delete any such emails.

Published in: on February 2, 2008 at 5:48 am  Leave a Comment  

• Camp Street Bridge?

Does Camp Street Bridge Makes Sense?
Guy W. Midkiff
Saturday, January 26, 2008

Washington, Missouri: Does the Camp Street justify the cost (about $1million tax payer dollars) of its resurrection? When one looks at a Map of Camp Street, it is clear that there are some problems with the project:

  • It appears to be a “Bridge to No Where.” It will not provide conduit traffic flows North and South, to make traffic arteries. You will not be able to go in a straight line from 5th Street to Highway 100.
  • It will increase, substantially, traffic on local neighborhood streets, increasing the possibility of children being hit by speeding cars and stress on local neighborhoods.
  • As the project stands now, it does not pass my litmus test of, “Is it good for Washington?”
  • “Safety.” This logically can not be the default answer for every project the city decides to pursue. And safety, as the final arbiter, works both ways. There is a very real and increased chance that additional traffic through residential areas, will result in a child being injured by a car that would have otherwise taken a different route.

Guy W. Midkiff

Published in: on January 26, 2008 at 11:04 am  Comments (2)  

• Rep. Threlkeld on Property Tax Increases

Dear Mr. Boland:

Thank you for your letter expressing your concern regarding the difficulties we all face as we continue to be required to pay higher and higher property taxes without a vote of the people. I agree with many of your observations and am frustrated, too.

When I came to the Missouri General Assembly over three years ago, I had high hopes of playing a major role in correcting this problem. I asked for and received appointment to the Senior Security Committee. This committee handled the hearings for multiple bills that would have corrected the property tax problem. I had a ringside seat for every bill and watched as the education lobby opposed every one.

Though this opposition could not derail my support for property tax reform, unfortunately, I cannot say the same for many of my colleagues. I hope that the voters in each of their districts will ask them why they are not willing to do what is fair and what is right. It is still possible to provide healthy funding for our public schools using other sources of revenue, and I have not given up on eventual reform. While the Legislature is too weak to act, there appears to be two more options.

First, there is a ballot initiative which may go to a vote of the people in November if enough petition signatures are obtained. I’m told that this initiative would eliminate use of the local property tax for school funding, and require the state to provide all funding for public schools.

Second, while I am not a fan of lawsuits, this issue appears to me to be ripe for one. Article X of the Missouri Constitution appears pretty clear about not taxing Missourians at higher levels without their approval. I have been researching and collecting information regarding this. If all else fails, litigation may be the last option. I’ll know more after the November elections.

Sharing your frustration,

Rep. Kevin Threlkeld

Published in: on January 21, 2008 at 11:01 pm  Leave a Comment  

• Hancock Amendment Loophole Explained

Guy W. Midkiff
1-20-08
Guy W. Midkiff

Hancock Amendment Loophole Explained

Taxing districts have a tax rate ceiling and a tax rate levy. The tax rate ceiling is the maximum authorized voter approved levy. However, taxing districts may levy a rate below their tax rate ceiling. During a reassessment year, if the taxing district levies a rate below their tax rate ceiling, the taxing entity could leave the rate the same on the sometimes higher assessments. The Hancock Amendment requires that the tax rate ceiling roll back, not necessarily the tax rate levy. Senator Gibbons and other legislators are trying to close this loophole by requiring taxing districts, in a reassessment year, to roll back their prior year’s tax rate levy regardless if the taxing district levied a rate the same as the ceiling. In a non-reassessment year, the taxing district could increase their tax rate levy to their tax rate ceiling. The intention behind this change is to prevent the process of reassessment, which is the equalization of the tax burden of the property owners in taxing districts, from causing tax increases.

An example is as follows:

Tax district X has a 2006 assessed valuation of $100,000,000, a tax rate of $1.00, and a tax rate ceiling of $1.50.

Tax Rate: ($100,000,000/100) X $1.00 = $1,000,000

In 2006, tax district X collected $1,000,000.

Tax Ceiling: ($100,000,000/100) X $1.50 = $1,500,000

In 2006, the taxing district could have collected $1,500,000 if they levied a rate equal to their tax rate ceiling.

In 2007, the properties in taxing district X were reassessed at a value of $125,000,000. $5,000,000 of the increase is new construction and improvements, which is not factored into the rollback, and $20,000,000 of the increase is due to the value of the properties increasing in value. The growth in the consumer price index in 2007 was 2.6%.

Under current law, only the tax ceiling is required to rollback in accordance with the Hancock Amendment and tax district X’s ceiling would rollback as follows:

$1,500,000 X 1.026 = $1,539,000

$125,000,000 – $5,000,000 = $120,000,000

$1,539,000/$120,000,000 = .01285

.01285 X 100 = $1.285

The tax rate ceiling for tax district X would be $1.285. Tax district X could legally keep the tax rate $1.00 and receive a windfall from reassessment.

Senate Bill 711, however, would require the taxing district to rollback its 2006 tax rate as if it were its tax rate ceiling in a reassessment year.

$1,000,000 X 1.026 = $1,026,000

$125,000,000 – $5,000,000 = $120,000,000

$1,026,000/$120,000,000 = .00855

.00855 X100 = $.855

Under Senate Bill 711, tax district X could have levied a maximum of $.855 in 2007.

The taxing district would be able to levy up to its tax rate ceiling in the non-reassessment year.

Another loophole that Senator Gibbons is trying to close relates to the manner in which taxing districts apply tax increases.

Currently, taxing districts can apply new voter approved levies to future and unknown assessments, many times reaping an unaccounted tax increase in addition to the newly approved tax increase. Senate Bill 711 closes this loophole by requiring taxing districts to apply the new approved levy to the assessments most recently certified by the State Tax Commission.

An example of how this works is as follows:

In 2006, tax district Y had an assessed valuation of $500,000,000, a tax rate of $1.00 and a tax rate ceiling of $1.00.

In November of 2006, tax district Y submits a tax increase to its voters which passes, increasing its tax rate ceiling to $1.25 for the 2007 tax year.

$500,000,000/100 = $5,000,000

$5,000,000 X $1.00

$5,000,000 X $1.25 = $6,250,000

Residents of tax district Y approved a tax increase of $1,250,000 for a total of $6,250,000.

In 2007, the properties in tax district Y are reassessed producing a total assessed valuation of $625,000,000. $25,000,000 of the increase in assessed value is due to new construction and improvements and $100,000,000 of the increase in assessed valuation is due to the value of the properties in the district increasing in value.

Legally, however, because of how state law is currently written, taxing districts can apply the new approved $1.25 levy to 2007 assessments. The $1.25 tax rate ceiling does not rollback in 2007 to account for the changes in assessed valuation.

$625,000,000 -$25,000,000 = $600,000,000

$600,000,000/100 = $6,000,000

$6,000,000 X $1.25 = $7,500,000

The voters of tax district Y have unsuspectingly approved a tax increase of $2,500,000, $1,250,000 more than they thought they had approved.

Senate Bill 711 would require the $1.25 tax rate for tax district Y to rollback according to the increases in assessed valuation in 2007.

$6,250,000 X 1.026 = $6,412,500

$6,412,500/$600,000,000 = .0106875

.0106875 X 100 = $1.0688

Under SB 711, the most the tax district Y could levy in 2007 would be $1.0688, not $1.25.

This loophole has been in effect since 2003 (when the interpretation of the law was changed, the result of an Attorney General memo, 107-2003). Taxing districts have taken advantage of the loophole in the past, but SB 711 closes this loophole and ensures that taxing districts will not gain windfalls from reassessment.

• Closing Hancock Amendment Loophole

EXPLANATION

 

This is a House Joint Resolution amends our Constitution.  The brackets delete the words [maximum authorized]

 

Maximum Authorized refers to the Tax Rate Ceiling.  As you recall unless a taxing entity exceeds their tax rate ceiling or maximum authorized levy, they are not required by current law to roll back their tax rate.  By removing these words, taxing jurisdictions will be required to roll back their tax rates based on their previous years levy.  The state tax commission informs me that the only way to properly force the roll backs is by amending the constitution.  Even though my HB 1349 accomplishes the same, the tax commission believes that the changes in statue would be subject to court challenge unless the changes are also reflected in our state constitution.

HB 1349 (Complete Text Link)

 

http://www.house.mo.gov/billtracking/bills081/biltxt/intro/HB1349I.htm

 

(Summary & Summary Link)

 

http://www.house.mo.gov/billtracking/bills081/bilsum/intro/sHB1349I.htm

 

HB 1349 -- Property Tax Rates
 
Sponsor:  Portwood
 
This bill revises the definition of "tax rate ceiling" to the tax
rate used by the taxing authority in the preceding year and
limits the revenue received from a voter-approved tax rate
increase to the amount determined by applying the levy increase
to the prior year's assessed valuation.

 

This legislation closes the loophole that taxing jurisdiction use to skirt the Hancock amendment.  Currently, if a taxing authority is not at their “tax rate” ceiling, they are not required to roll back their tax rate regardless of the amount of revenue they receive from re-assessment.  This change simply requires taxing authorities to roll back their tax rate based upon the previous year’s tax rate NOT their maximum allowed ceiling.  The bill also requires that voter approved levy increase must be rolled back to the revenue generated in the no re-assessment year so that taxing jurisdictions cannot experience a non voter approved windfall from re-assessment.

HOUSE BILL NO. 1349

94TH GENERAL ASSEMBLY


 INTRODUCED BY REPRESENTATIVES PORTWOOD (Sponsor), JONES (89), CUNNINGHAM (86), LEMBKE AND BIVINS (Co-sponsors).

                  Pre-filed December 3, 2007 and copies ordered printed.

D. ADAM CRUMBLISS, Chief Clerk

3697L.01I


AN ACT

To repeal section 137.073, RSMo, and to enact in lieu thereof one new section relating to             property tax rate revisions.


 

Be it enacted by the General Assembly of the state of Missouri, as follows:

            Section A. Section 137.073, RSMo, is repealed and one new section enacted in lieu thereof, to be known as section 137.073, to read as follows:

            137.073. 1. As used in this section, the following terms mean:

            (1) “General reassessment”, changes in value, entered in the assessor’s books, of a substantial portion of the parcels of real property within a county resulting wholly or partly from reappraisal of value or other actions of the assessor or county equalization body or ordered by the state tax commission or any court;

            (2) “Tax rate”, “rate”, or “rate of levy”, singular or plural, includes the tax rate for each purpose of taxation of property a taxing authority is authorized to levy without a vote and any tax rate authorized by election, including bond interest and sinking fund;

            (3) “Tax rate ceiling”, [a] the tax rate [as revised] used by the taxing authority [to comply with the provisions of this section or when a court has determined] in the preceding year or the tax rate determined by a court; except that, other provisions of law to the contrary notwithstanding, a school district may levy the operating levy for school purposes required for the current year pursuant to subsection 2 of section 163.021, RSMo, less all adjustments required pursuant to article X, section 22 of the Missouri Constitution, if such tax rate does not exceed the highest tax rate in effect subsequent to the 1980 tax year, provided that all levy assessments shall begin from the preceding year’s tax rate. This is the maximum tax rate that may be levied, unless a higher tax rate ceiling is approved by voters of the political subdivision as provided in this section;

            (4) “Tax revenue”, when referring to the previous year, means the actual receipts from ad valorem levies on all classes of property, including state-assessed property, in the immediately preceding fiscal year of the political subdivision, plus an allowance for taxes billed but not collected in the fiscal year and plus an additional allowance for the revenue which would have been collected from property which was annexed by such political subdivision but which was not previously used in determining tax revenue pursuant to this section. The term “tax revenue” shall not include any receipts from ad valorem levies on any property of a railroad corporation or a public utility, as these terms are defined in section 386.020, RSMo, which were assessed by the assessor of a county or city in the previous year but are assessed by the state tax commission in the current year. All school districts and those counties levying sales taxes pursuant to chapter 67, RSMo, shall include in the calculation of tax revenue an amount equivalent to that by which they reduced property tax levies as a result of sales tax pursuant to section 67.505, RSMo, and section 164.013, RSMo, or as excess home dock city or county fees as provided in subsection 4 of section 313.820, RSMo, in the immediately preceding fiscal year but not including any amount calculated to adjust for prior years. For purposes of political subdivisions which were authorized to levy a tax in the prior year but which did not levy such tax or levied a reduced rate, the term “tax revenue”, as used in relation to the revision of tax levies mandated by law, shall mean the revenues equal to the amount that would have been available if the voluntary rate reduction had not been made.

            2. Whenever changes in assessed valuation are entered in the assessor’s books for any personal property, in the aggregate, or for any subclass of real property as such subclasses are established in section 4(b) of article X of the Missouri Constitution and defined in section 137.016, the county clerk in all counties and the assessor of St. Louis City shall notify each political subdivision wholly or partially within the county or St. Louis City of the change in valuation of each subclass of real property, individually, and personal property, in the aggregate, exclusive of new construction and improvements. All political subdivisions shall immediately revise the applicable rates of levy for each purpose for each subclass of real property, individually, and personal property, in the aggregate, for which taxes are levied to the extent necessary to produce from all taxable property, exclusive of new construction and improvements, substantially the same amount of tax revenue as was produced in the previous year for each subclass of real property, individually, and personal property, in the aggregate, except that the rate may not exceed the greater of the rate in effect in the 1984 tax year or the [most recent voter-approved] preceding year’s tax rate. Such tax revenue shall not include any receipts from ad valorem levies on any real property which was assessed by the assessor of a county or city in such previous year but is assessed by the assessor of a county or city in the current year in a different subclass of real property. Where the taxing authority is a school district for the purposes of revising the applicable rates of levy for each subclass of real property, the tax revenues from state-assessed railroad and utility property shall be apportioned and attributed to each subclass of real property based on the percentage of the total assessed valuation of the county that each subclass of real property represents in the current taxable year. As provided in section 22 of article X of the constitution, a political subdivision may also revise each levy to allow for inflationary assessment growth occurring within the political subdivision. The inflationary growth factor for any such subclass of real property or personal property shall be limited to the actual assessment growth in such subclass or class, exclusive of new construction and improvements, and exclusive of the assessed value on any real property which was assessed by the assessor of a county or city in the current year in a different subclass of real property, but not to exceed the consumer price index or five percent, whichever is lower. Should the tax revenue of a political subdivision from the various tax rates determined in this subsection be different than the tax revenue that would have been determined from a single tax rate as calculated pursuant to the method of calculation in this subsection prior to January 1, 2003, then the political subdivision shall revise the tax rates of those subclasses of real property, individually, and/or personal property, in the aggregate, in which there is a tax rate reduction, pursuant to the provisions of this subsection. Such revision shall yield an amount equal to such difference and shall be apportioned among such subclasses of real property, individually, and/or personal property, in the aggregate, based on the relative assessed valuation of the class or subclasses of property experiencing a tax rate reduction. Such revision in the tax rates of each class or subclass shall be made by computing the percentage of current year adjusted assessed valuation of each class or subclass with a tax rate reduction to the total current year adjusted assessed valuation of the class or subclasses with a tax rate reduction, multiplying the resulting percentages by the revenue difference between the single rate calculation and the calculations pursuant to this subsection and dividing by the respective adjusted current year assessed valuation of each class or subclass to determine the adjustment to the rate to be levied upon each class or subclass of property. The adjustment computed herein shall be multiplied by one hundred, rounded to four decimals in the manner provided in this subsection, and added to the initial rate computed for each class or subclass of property. Notwithstanding any provision of this subsection to the contrary, no revision to the rate of levy for personal property shall cause such levy to increase over the levy for personal property from the prior year.

            3. (1) Where the taxing authority is a school district, it shall be required to revise the rates of levy from the preceding year’s tax rate to the extent necessary to produce from all taxable property, including state-assessed railroad and utility property, which shall be separately estimated in addition to other data required in complying with section 164.011, RSMo, substantially the amount of tax revenue permitted in this section. In the year following tax rate reduction, the tax rate ceiling may be adjusted to offset such district’s reduction in the apportionment of state school moneys due to its reduced tax rate. However, in the event any school district, in calculating a tax rate ceiling pursuant to this section, requiring the estimating of effects of state-assessed railroad and utility valuation or loss of state aid, discovers that the estimates used result in receipt of excess revenues, which would have required a lower rate if the actual information had been known, the school district shall reduce the tax rate ceiling in the following year to compensate for the excess receipts, and the recalculated rate shall become the tax rate ceiling for purposes of this section.

            (2) For any political subdivision which experiences a reduction in the amount of assessed valuation relating to a prior year, due to decisions of the state tax commission or a court pursuant to sections 138.430 to 138.433, RSMo, or due to clerical errors or corrections in the calculation or recordation of any assessed valuation:

            (a) Such political subdivision may revise the tax rate ceiling for each purpose it levies taxes to compensate for the reduction in assessed value occurring after the political subdivision calculated the tax rate ceiling for the particular subclass of real property or for personal property, in the aggregate, in the prior year. Such revision by the political subdivision shall be made at the time of the next calculation of the tax rate for the particular subclass of real property or for personal property, in the aggregate, after the reduction in assessed valuation has been determined and shall be calculated in a manner that results in the revised tax rate ceiling being the same as it would have been had the corrected or finalized assessment been available at the time of the prior calculation;

            (b) In addition, for up to three years following the determination of the reduction in assessed valuation as a result of circumstances defined in this subdivision, such political subdivision may levy a tax rate for each purpose it levies taxes above the revised tax rate ceiling provided in paragraph (a) of this subdivision to recoup any revenues it was entitled to receive for the three-year period preceding such determination.

            4. (1) In order to implement the provisions of this section and section 22 of article X of the Constitution of Missouri, the term “improvements” shall apply to both real and personal property. In order to determine the value of new construction and improvements, each county assessor shall maintain a record of real property valuations in such a manner as to identify each year the increase in valuation for each political subdivision in the county as a result of new construction and improvements. The value of new construction and improvements shall include the additional assessed value of all improvements or additions to real property which were begun after and were not part of the prior year’s assessment, except that the additional assessed value of all improvements or additions to real property which had been totally or partially exempt from ad valorem taxes pursuant to sections 99.800 to 99.865, RSMo, sections 135.200 to 135.255, RSMo, and section 353.110, RSMo, shall be included in the value of new construction and improvements when the property becomes totally or partially subject to assessment and payment of all ad valorem taxes. The aggregate increase in valuation of personal property for the current year over that of the previous year is the equivalent of the new construction and improvements factor for personal property. Notwithstanding any opt-out implemented pursuant to subsection 15 of section 137.115, the assessor shall certify the amount of new construction and improvements and the amount of assessed value on any real property which was assessed by the assessor of a county or city in such previous year but is assessed by the assessor of a county or city in the current year in a different subclass of real property separately for each of the three subclasses of real property for each political subdivision to the county clerk in order that political subdivisions shall have this information for the purpose of calculating tax rates pursuant to this section and section 22, article X, Constitution of Missouri. In addition, the state tax commission shall certify each year to each county clerk the increase in the general price level as measured by the Consumer Price Index for All Urban Consumers for the United States, or its successor publications, as defined and officially reported by the United States Department of Labor, or its successor agency. The state tax commission shall certify the increase in such index on the latest twelve-month basis available on June first of each year over the immediately preceding prior twelve-month period in order that political subdivisions shall have this information available in setting their tax rates according to law and section 22 of article X of the Constitution of Missouri. For purposes of implementing the provisions of this section and section 22 of article X of the Missouri Constitution, the term “property” means all taxable property, including state-assessed property.

            (2) Each political subdivision required to revise rates of levy pursuant to this section or section 22 of article X of the Constitution of Missouri shall calculate each tax rate it is authorized to levy and, in establishing each tax rate, shall consider each provision for tax rate revision provided in this section and section 22 of article X of the Constitution of Missouri, separately and without regard to annual tax rate reductions provided in section 67.505, RSMo, and section 164.013, RSMo. Each political subdivision shall set each tax rate it is authorized to levy using the calculation that produces the lowest tax rate ceiling. It is further the intent of the general assembly, pursuant to the authority of section 10(c) of article X of the Constitution of Missouri, that the provisions of such section be applicable to tax rate revisions mandated pursuant to section 22 of article X of the Constitution of Missouri as to reestablishing tax rates as revised in subsequent years, enforcement provisions, and other provisions not in conflict with section 22 of article X of the Constitution of Missouri. Annual tax rate reductions provided in section 67.505, RSMo, and section 164.013, RSMo, shall be applied to the tax rate as established pursuant to this section and section 22 of article X of the Constitution of Missouri, unless otherwise provided by law.

            5. (1) In all political subdivisions, the tax rate ceiling established pursuant to this section shall not be increased unless approved by a vote of the people. Approval of the higher tax rate shall be by at least a majority of votes cast. When a proposed higher tax rate requires approval by more than a simple majority pursuant to any provision of law or the constitution, the tax rate increase must receive approval by at least the majority required.

            (2) When voters approve an increase in the tax rate, the amount of the increase shall be added to the tax rate ceiling as calculated pursuant to this section to the extent the total rate does not exceed any maximum rate prescribed by law. The amount of revenue received from the voter-approved increase in the tax rate shall not exceed the revenue derived by applying the levy increase to the preceding year’s assessed valuation as certified by the state tax commission. If a ballot question presents a stated tax rate for approval rather than describing the amount of increase in the question, the stated tax rate approved shall be the current tax rate ceiling. The increased tax rate ceiling as approved may be applied to the total assessed valuation of the political subdivision at the setting of the next tax rate.

            (3) The governing body of any political subdivision may levy a tax rate lower than its tax rate ceiling [and may increase that lowered tax rate to a level not exceeding the tax rate ceiling without voter approval].

            6. (1) For the purposes of calculating state aid for public schools pursuant to section 163.031, RSMo, each taxing authority which is a school district shall determine its proposed tax rate as a blended rate of the classes or subclasses of property. Such blended rate shall be calculated by first determining the total tax revenue of the property within the jurisdiction of the taxing authority, which amount shall be equal to the sum of the products of multiplying the assessed valuation of each class and subclass of property by the corresponding tax rate for such class or subclass, then dividing the total tax revenue by the total assessed valuation of the same jurisdiction, and then multiplying the resulting quotient by a factor of one hundred. Where the taxing authority is a school district, such blended rate shall also be used by such school district for calculating revenue from state-assessed railroad and utility property as defined in chapter 151, RSMo, and for apportioning the tax rate by purpose.

            (2) Each taxing authority proposing to levy a tax rate in any year shall notify the clerk of the county commission in the county or counties where the tax rate applies of its tax rate ceiling and its proposed tax rate. Each taxing authority shall express its proposed tax rate in a fraction equal to the nearest one-tenth of a cent, unless its proposed tax rate is in excess of one dollar, then one/one-hundredth of a cent. If a taxing authority shall round to one/one-hundredth of a cent, it shall round up a fraction greater than or equal to five/one-thousandth of one cent to the next higher one/one-hundredth of a cent; if a taxing authority shall round to one-tenth of a cent, it shall round up a fraction greater than or equal to five/one-hundredths of a cent to the next higher one-tenth of a cent. Any taxing authority levying a property tax rate shall provide data, in such form as shall be prescribed by the state auditor by rule, substantiating such tax rate complies with Missouri law. All forms for the calculation of rates pursuant to this section shall be promulgated as a rule and shall not be incorporated by reference. The state auditor shall promulgate rules for any and all forms for the calculation of rates pursuant to this section which do not currently exist in rule form or that have been incorporated by reference. In addition, each taxing authority proposing to levy a tax rate for debt service shall provide data, in such form as shall be prescribed by the state auditor by rule, substantiating the tax rate for debt service complies with Missouri law. A tax rate proposed for annual debt service requirements will be prima facie valid if, after making the payment for which the tax was levied, bonds remain outstanding and the debt fund reserves do not exceed the following year’s payments. The county clerk shall keep on file and available for public inspection all such information for a period of three years. The clerk shall, within three days of receipt, forward a copy of the notice of a taxing authority’s tax rate ceiling and proposed tax rate and any substantiating data to the state auditor. The state auditor shall, within fifteen days of the date of receipt, examine such information and return to the county clerk his or her findings as to compliance of the tax rate ceiling with this section and as to compliance of any proposed tax rate for debt service with Missouri law. If the state auditor believes that a taxing authority’s proposed tax rate does not comply with Missouri law, then the state auditor’s findings shall include a recalculated tax rate, and the state auditor may request a taxing authority to submit documentation supporting such taxing authority’s proposed tax rate. The county clerk shall immediately forward a copy of the auditor’s findings to the taxing authority and shall file a copy of the findings with the information received from the taxing authority. The taxing authority shall have fifteen days from the date of receipt from the county clerk of the state auditor’s findings and any request for supporting documentation to accept or reject in writing the rate change certified by the state auditor and to submit all requested information to the state auditor. A copy of the taxing authority’s acceptance or rejection and any information submitted to the state auditor shall also be mailed to the county clerk. If a taxing authority rejects a rate change certified by the state auditor and the state auditor does not receive supporting information which justifies the taxing authority’s original or any subsequent proposed tax rate, then the state auditor shall refer the perceived violations of such taxing authority to the attorney general’s office and the attorney general is authorized to obtain injunctive relief to prevent the taxing authority from levying a violative tax rate.

            7. No tax rate shall be extended on the tax rolls by the county clerk unless the political subdivision has complied with the foregoing provisions of this section.

            8. Whenever a taxpayer has cause to believe that a taxing authority has not complied with the provisions of this section, the taxpayer may make a formal complaint with the prosecuting attorney of the county. Where the prosecuting attorney fails to bring an action within ten days of the filing of the complaint, the taxpayer may bring a civil action pursuant to this section and institute an action as representative of a class of all taxpayers within a taxing authority if the class is so numerous that joinder of all members is impracticable, if there are questions of law or fact common to the class, if the claims or defenses of the representative parties are typical of the claims or defenses of the class, and if the representative parties will fairly and adequately protect the interests of the class. In any class action maintained pursuant to this section, the court may direct to the members of the class a notice to be published at least once each week for four consecutive weeks in a newspaper of general circulation published in the county where the civil action is commenced and in other counties within the jurisdiction of a taxing authority. The notice shall advise each member that the court will exclude him or her from the class if he or she so requests by a specified date, that the judgment, whether favorable or not, will include all members who do not request exclusion, and that any member who does not request exclusion may, if he or she desires, enter an appearance. In any class action brought pursuant to this section, the court, in addition to the relief requested, shall assess against the taxing authority found to be in violation of this section the reasonable costs of bringing the action, including reasonable attorney’s fees, provided no attorney’s fees shall be awarded any attorney or association of attorneys who receive public funds from any source for their services. Any action brought pursuant to this section shall be set for hearing as soon as practicable after the cause is at issue.

            9. If in any action, including a class action, the court issues an order requiring a taxing authority to revise the tax rates as provided in this section or enjoins a taxing authority from the collection of a tax because of its failure to revise the rate of levy as provided in this section, any taxpayer paying his or her taxes when an improper rate is applied has erroneously paid his or her taxes in part, whether or not the taxes are paid under protest as provided in section 139.031, RSMo. The part of the taxes paid erroneously is the difference in the amount produced by the original levy and the amount produced by the revised levy. The township or county collector of taxes or the collector of taxes in any city shall refund the amount of the tax erroneously paid. The taxing authority refusing to revise the rate of levy as provided in this section shall make available to the collector all funds necessary to make refunds pursuant to this subsection. No taxpayer shall receive any interest on any money erroneously paid by him or her pursuant to this subsection. Effective in the 1994 tax year, nothing in this section shall be construed to require a taxing authority to refund any tax erroneously paid prior to or during the third tax year preceding the current tax year.

            10. A taxing authority, including but not limited to a township, county collector, or collector of taxes, responsible for determining and collecting the amount of residential real property tax levied in its jurisdiction, shall report such amount of tax collected by December thirty-first of each year such property is assessed to the state tax commission. The state tax commission shall compile the tax data by county or taxing jurisdiction and submit a report to the general assembly no later than January thirty-first of the following year.

            11. Any rule or portion of a rule, as that term is defined in section 536.010, RSMo, that is created under the authority delegated in this section shall become effective only if it complies with and is subject to all of the provisions of chapter 536, RSMo, and, if applicable, section 536.028, RSMo. This section and chapter 536, RSMo, are nonseverable and if any of the powers vested with the general assembly pursuant to chapter 536, RSMo, to review, to delay the effective date, or to disapprove and annul a rule are subsequently held unconstitutional, then the grant of rulemaking authority and any rule proposed or adopted after August 28, 2004, shall be invalid and void.

 

• Tax and Spending Limits? TELs

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Cato Policy Analysis No. 213 July 25, 1994

Policy Analysis

Taming Leviathan:
Are Tax and Spending Limits the Answer?

by Dean Stansel

Dean Stansel is a fiscal policy analyst at the Cato Institute.


Executive Summary

After a decade of dormancy, the tax revolt is back. Fed up with rapidly rising state budgets, Americans are increasingly taking matters into their own hands, voting into law limits on the ability of state lawmakers to tax and spend. In the past two years, five states approved such populist measures. This year voters in as many as six states will have the opportunity to vote on some type of tax limitation initiative.

The opposition to tax and expenditure limitations (TELs) is enormous. Opponents charge that restraining the growth of taxes and spending is impossible without doing things like taking cops off the beat and firefighters out of the firehouse. Other critics make precisely the opposite complaint about TELs, charging that TELs are ineffective and do not limit the growth of taxes and spending as promised.

This study demonstrates that properly designed TELs can and do limit the growth of state taxes and spending. For example, the growth rate of per capita state spending in TEL states fell from 0.8 percentage points above the U.S. average in the five years preceding TEL enactment to 2.9 percentage points below the U.S. average in the five years after TEL enactment.

Unfortunately, many TELs are designed in a way that minimizes their effectiveness. This study examines that issue and provides a detailed description of how an effective TEL should be designed.

If the citizens of a state wish to limit the growth of Leviathan, they should not abandon TELs; instead, they should ensure that the TELs are properly constructed.

Introduction

The grassroots tax revolt, which began in the stagflationary years of the late 1970s, is brewing again. Though the misery index is not what it was in the days of Proposition 13, there is a rising sentiment among voters that state government has grown too large. That sentiment is groundedin reality: since 1980 total state spending has climbed by 60 percent (after adjusting for inflation).[1]

The movement for tax and expenditure limitations (TELs) is growing in much the same way the term-limits movement is. In 1991 two states–Connecticut and North Carolina–enacted TELs for the first time, and two other states–Colorado and Louisiana–modified their TELs. Since then five states have enacted measures to restrain the growth of taxes and spending.[2]

In March 1992 Oklahomans passed a constitutional amendment requiring all tax increases to pass both houses of the state legislature with a three-fourths majority or be approved by a majority of the voters.In November 1992 voters in Colorado passed Amendment 1, the Taxpayer Bill of Rights. That measure requires that any increase in taxes–state or local–be approved by the voters. It also limits spending growth to that necessary to keep pace with population growth and inflation.

Also in November 1992 voters in Connecticut passed a constitutional amendment limiting spending growth to the rate of growth of personal income or inflation, whichever is greater.

In 1992 an overwhelming 72 percent of Arizona voters approved a constitutional amendment requiring a two-thirds majority in the legislature for any increase in taxes or fees.

Finally, voters in Washington State approved a constitutional amendment in November 1993 that limits state spending growth to the rate of population growth plus inflation and requires voter approval of any tax increases that would exceed that limit.

All told, 23 states now have TELs. In addition, this year on election day in November, voters in as many as six states will have the chance to vote on some type of tax limitation initiative.[3] (Table A.1 in the appendix summarizes each of the prospective ballot initiatives.)

Although many critics have claimed that TELs are not an effective means of restraining the growth of taxes and spending, this study presents new evidence refuting those contentions. It finds that TELs, when designed properly, can be and have been an effective tool for restraining the growth of both taxes and spending.

The five-year growth rate of per capita state spending in TEL states fell from 0.8 percentage points above the U.S. average in the five years before TEL enactment to 2.9 percentage points below the U.S. average in the five years after enactment.Per capita spending in TEL states fell from 6.4 percent above the U.S. average in the year of TEL enactment to only 1.7 percent above the U.S. average in 1992.

If the level of per capita spending in TEL states had not declined, the state spending burden per family of four in those states would have been, on average, $450 more in 1992 than it was.

Similar declines in the growth and level of spending in TEL states were found when those states were compared with non-TEL-states, and an examination of state taxes and state and local spending shows the same pattern of change. In sum, TELs appear to have imposed restraint on the growth of state budgets and taxes.

Why TELs Are Needed

The expansion of government over the past several decades has been enormous. Since 1950 the real growth of government spending at all levels has outpaced population growth by a margin of almost eight to one. As a result, the per capita burden of government exploded upward by 254 percent, even after adjusting for inflation.[4]

Though real government spending at all levels surged by 480 percent from 1950 to 1990, real state government spending rose even faster, by 534 percent.[5] Over the last two decades that burden has been growing even larger.[6] As Figure 1 shows, from 1970 to 1980, real state spending grew more than two and a half times faster than population. More recently, from 1980 to 1990, real state spending grew over four times faster than the number of those it serves. Since 1980 many state budgets have nearly doubled in size, even after adjusting for inflation. State taxes have climbed at a similar pace.

Figure 1
State Spending Growth vs. Population Growth

Growing evidence indicates that voters do not want government to be as large as it has become. Exit polls on election day in November 1992 indicated that, given a choice between lower taxes and more government services, 55 percent of voters preferred to keep taxes down, even if that meant fewer government services, while only 36 percent said the opposite. One year later in a similar poll in New Jersey, an even higher 60 percent of voters said they would prefer lower taxes and fewer services, compared to just 33 percent who said the opposite.[7] It is in part such hostility to government that is driving the tax revolt. Not trusting politicians to restrain budget growth and rising tax burdens, Americans are increasingly taking matters into their own hands, voting into law strict limits on the ability of their state governments to tax and spend.

History of the Tax Revolt

In June 1978 voters in California, fed up with skyrocketing property taxes, overwhelmingly passed Proposition 13. Hatched by anti-tax crusader Howard Jarvis, Proposition 13 rolled back local property taxes to 1 percent of assessed valuation, limited assessment increases to the lower of 2 percent or the annual inflation rate, required two-thirds voter approval for new local taxes, and required two-thirds approval of the legislature to raise existing or impose new taxes.

The passage of Proposition 13 led to a push for numerous similar measures in other states. Between 1978 and 1980, 43 states adopted new limitations on local property taxes or new property tax relief plans. Emboldened by their success, the tax revolters took aim at state taxes as well. Between 1978 and 1982, 15 states reduced their general income tax rates, 10 indexed their personal income tax systems, 7 eliminated their gift taxes, and 6 repealed their inheritance taxes.[8]

In addition, explicit limits on spending were imposed. In 1976 New Jersey passed the first state TEL, and by 1982 TELs had been enacted in 20 states.[9] Though TEL enactment slowed along with the fervor of the tax revolt during the prosperous 1980s–only two additional states enacted TELs from 1983 to 1990–voter frustration is now reversing that trend.

What Other Studies Have Found

Many studies have contended that TELs do not effectively restrain the growth of government. For instance, Daphne Kenyon and Karen Benker examined the change in expenditures relative to personal income for TEL versus non-TEL states over the period 1978-83. They found that in some years TEL states saw slower spending growth than non-TEL states, while in other years TEL states saw faster spending growth than non-TEL states. Though Kenyon and Benker say that there is some evidence that TELs may have moderated spending in some states, they conclude that “for most states, TELs have not been a constraint on growth in taxing or spending.”[10]

Marcia Howard examined both state tax collections and state general fund expenditures as a share of personal income over the period 1980-87. She found that, while state taxes grew faster than personal income in TEL states, taxes outpaced income growth by slightly more in non-TEL states. Further, Howard found that state general fund expenditures as a share of personal income actually fell in TEL states, from 5.5 percent in 1979 to 5.41 percent in 1987, lower than spending in non-TEL states. She nevertheless concluded that, because the differences were small, there was an “absence of strong evidence that tax and expenditure limitations have been successful.”[11]

Dale Bails examined the change in five components of per capita state spending and revenue over the period 1981-85, the “post-tax revolt years.” He found that each of the measures grew more slowly in TEL states than in non-TEL states. For instance, per capita total general revenues rose 30 percent in TEL states compared to 36 percent in non-TEL states. However, Bails also found that the average annual growth of spending or revenue (the one to which the TEL applies) from the year of enactment to 1985 was lower than such growth over the period 1970 to the year of enactment in only one-third of the TEL states. Bails thus concluded that states’ TELs “resulted in virtually no success in limiting growth in their budgets.”[12]

James Cox and David Lowery examined the change in state spending and revenue relative to personal income in three TEL states, Michigan, South Carolina, and Tennessee. Each of those states was paired with a non-TEL state in its region. The authors found that TELs did not have a statistically discernible effect on the growth of government. Cox and Lowery concluded that “by and large, the behavior of the cap states has been similar to that of noncap states.”[13]

Each of those studies identifies specific factors that limit the effectiveness of TELs, many of which are related to the faulty design of individual TELs. Since TELs are often designed by politicians–the very people whose behavior TELs are intended to restrain–it should come as nosurprise that they frequently are worded in a way that makes their restraints as weak and easily circumvented as possible.

Despite their recognition that faulty design is often the root of the problem, most studies that find TELs to be ineffective do not recommend strengthening them by eliminat ing their flaws. Instead, the studies conclude that TELs should be abandoned.

In contrast, there have been several studies that have found TELs to be effective. Stephen Moore examined a variety of fiscal discipline mechanisms and found that average state spending as a share of income in TEL states fell from 4 percent higher than the average for non-TEL states in 1979 to 10 percent lower than the average for non-TEL states by 1987.[14]

Barry Poulson found that the impact of TELs on state spending during their first four years of existence was “negative for all [TEL] states and significant for seven of those states. . . . The implication is that for these seven states the absence of the TEL would have resulted in significantly greater increases in government expenditures in the short run.”[15]

So while there is some dispute as to whether TELs are effective at restraining the growth of government, even the staunchest TEL advocates will admit that TELs have not worked as well as proponents would have liked. There is broad agreement, however, on the importance of the design of TELs to their effectiveness.

Methodology

This study focuses primarily on the performance of TELs as a whole, with a few minor exceptions noted below. In later sections, the performance of well-designed and poorly designed TELs is compared.

To measure the effectiveness of TELs in restraining government growth, this study examines how the growth rates and levels of taxes and spending in states with TELs changed after the TELs were enacted.[16] To adjust for the effect of population changes, per capita figures were used.

Of the 23 states with TELs, 21 had enacted them by 1986. While no state enacted a TEL for the first time between 1986 and 1990, two states, Connecticut and North Carolina, have done so since 1990. Those two states are excluded because there is not yet sufficient data to adequately examine the effect of their TELs. In addition, Rhode Island and Nevada are excluded because their TELs are nonbinding, applying only to the governor’s recommended budget. Finally, Alaska is also excluded because of peculiarities in its budgetary structure that make comparisons with other states problematic.[17] Unless otherwise noted, “TEL-state average” herein refers to the 18 states with binding TELs that were enacted by 1986.[18] Table 1 lists those states and the years of initial TEL enactment.

Table A.2 gives the growth rate of spending in each of the 18 TEL states over the five years immediately preceding and the five years immediately following enactment of the TEL. The number of percentage points by which each TEL state’s spending growth rate differs from the U.S. average growth rate over those periods is then calculated.[19]

Table 1: States with Binding TELs
State
Year of Adoption
Arizona 1978
California 1979
Colorado 1977
Delaware 1980
Hawaii 1978
Idaho 1980
Louisiana 1979
Massachusetts 1986
Michigan 1978
Missouri 1980
Montana 1981
Oklahoma 1985
Oregon 1979
South Carolina 1980
Tennessee 1978
Texas 1978
Utah 1979
Washington 1979

A TEL-state average is then found for the percentage points by which the five-year growth rates differ from the U.S. average. That average summarizes how the growth rate of spending in TEL states changed relative to the growth rate of the U.S. average after enactment of a TEL.

The same methodology is used to compare TEL-state spending growth to the non-TEL-state average and to calculate and compare per capita state taxes and per capita state and local spending.[20] The results of those calculations for TEL states as a group are summarized below, and a completelist can be found in Tables A.3-A.6 in the appendix.[21]

State Spending

Most TELs are limits on spending. So the most direct way to evaluate the effectiveness of TELs is by examining their impact on state expenditures. If a TEL is effective, it should lower the growth rate of state spending. The average growth rate of per capita state spending in TELstates changed, relative to the U.S. average, in the following respects after TEL enactment.

The five-year growth rate of per capita state spending in TEL states fell from 0.8 percentage points above the U.S. average before TEL enactment to 2.9 percentage points below the U.S. average after TEL enactment (Figure 2).

Figure 2
Growth Rate of per Capita State Spending Relative to U.S. Average for the Five Years Immediately Preceeding and the Five Years Immediately Following TEL Enactment

The growth rate of per capita state spending in TEL states from the year of enactment through 1992, as opposed to just five years after enactment, fell even lower, to 12.1 percentage points below the U.S. average.The five-year real growth rate of per capita state spending in TEL states fell from 7.1 percent before TEL enactment to 1.8 percent after TEL enactment.

If the real growth rate of per capita state spending in TEL states had not slowed, the state spending burden per family of four would have been, on average, $400 higher in those states five years after TEL enactment and $450 higher in 1992 than it was with the lower rate of spending growth.

In addition to the growth rate’s falling (relative to the U.S. average), the average level of per capita state spending in TEL states fell from 6.4 percent above the U.S. average in the year of enactment to 1.7 percent above the U.S. average in 1992 (Figure 3).

Figure 3
Per Capita State Spending Relative to U.S. Average, Year of TEL Enactment and 1992

State Taxes

Though most TELs apply to spending–of the 18 TELs examined here, only 5 apply directly to taxes or revenue–an effective TEL should slow the growth of state taxes as well. The average growth rate of per capita state taxes in TEL states changed in the following ways after TEL enactment.

The five-year growth rate of per capita state taxes in TEL states fell from 5.5 percentage points above the non-TEL-state average before TEL enactment to 12.5 percentage points below the non-TEL-state average after TEL enactment (Figure 4).

Figure 4
Growth Rate of per Capita State Taxes Relative to the Non-TEL State Average for the Five Years Immediately Preceding and the Five Years Immediately Following TEL Enactment

The growth rate of per capita state taxes in TEL states from the year of enactment through 1992, as opposed to just five years after enactment, fell even lower, to 13.2 percentage points below the non-TEL-state average.The five-year real growth rate of per capita state taxes in TEL states was 11.9 percent before TEL enactment. State taxes then fell by 2.8 percent over the five years after TEL enactment.

If real per capita tax growth in TEL states had not been reversed–that is, if real per capita taxes had risen 11.9 percent instead of declining 2.8 percent over the five years following TEL enactment–a family of four in one of the TEL states would have had to face, on average, a state tax burden that was $650 higher five years after TEL enactment than they faced with the lower growth rate of taxes.

As Figure 5 shows, as a result of the slower growth of state taxes, the level of taxes in TEL states fell in relation to taxes in the rest of the country after TEL enactment. Average per capita state taxes in TEL states fell from 8.8 percent above the non-TEL-state average in the year that TELs were enacted to 0.2 percent below it five years later.

Figure 5
Per Capita State Taxes Relative to the Non-TEL-State Average, Year of TEL Enactment and Five Years Later

So in each case in which the growth rates of spending and taxes in TEL states were compared to the U.S. and the non-TEL-state averages, TELs appeared to have been effective in slowing the growth of state government–although probably not as effective as their supporters had wished.

State and Local Spending

Many TEL critics claim that the real impact of TELs is not in restraining the overall tax and spending burden but in shifting it to local governments. That would presumably defeat the purpose of the TEL. While some TELs include a provision prohibiting the state government from shifting costs to local governments without providing the funding to cover those costs, most do not. Thus, some cost shifting is to be expected.

Incidentally, if the only impact of TELs were to shift government responsibility–for both financing and decision-making–to the local level, TELs might still be worthwhile. Since local politicians are closer to the people, they are more accountable and less likely to be able to get away with excessive spending. Also, moving spending to the local level more closely links the costs of public services to the beneficiaries. In fact, many studies have found that decentralized governments provide public services more efficiently than do centralized governments.[22]

Nevertheless, if the purpose of TELs is to limit the burden of government, then cost shifting may mean that those measures are less successful than their proponents intended.For example, if costs are fully shifted to local governments (i.e., local spending growth rises as much as state spending growth falls), then the total state and local tax burden in TEL states will not have fallen. And if that were the case, though state spending growth would have fallen, it would be misleading to conclude that the burden of government had been reduced.

One way to check for such cost shifting is to substitute per capita state and local spending for per capita state spending and perform the same tests that were used earlier. If a decline in state spending growth leads to a proportional rise in local spending growth, then combined state and local spending growth should not decline. Indeed, both the growth and the level of state and local spending in TEL states did decline, relative to those of the rest of the nation, though not as dramatically as state-level spending.

The five-year growth rate of per capita state and local spending in TEL states fell from 2.3 percentage points above the U.S. average before TEL enactment to 1.2 percentage points below the U.S. average after TEL enactment (Figure 6).

Figure 6
Growth Rate of per Captia State and Local Spending Relative to U.S. Average for the Five Years Immediately Preceeding and the Five Years Immediately Following TEL Enactment

The growth rate of per capita state and local spending in TEL states from the year of enactment through 1991, as opposed to just five years after enactment, fell even lower, to 10.2 percentage points below the U.S. average.[23]The five-year real growth rate of per capita state and local spending in TEL states fell from 6.1 percent before TEL enactment to 2.4 percent after TEL enactment.

Figure 7 shows that, like the growth rate, the level of state and local spending in TEL states fell (relative to the rest of the nation) after TEL enactment. Average per capita state and local spending in TEL states fell from 0.1 percent below the U.S. average in the year that TELs were enacted to 4.4 percent below it in 1991. Thus, in addition to the burden of state government’s falling after TEL enactment, the overall burden of state and local government fell.

Figure 7
Per Capita State and Local Spending Relative to U.S. Average, Year of Enactment and 1991

The data suggest that, as expected, some cost shifting to local governments has, indeed, occurred. However, the data also show that in addition to restraining the growth of state government, as indicated earlier, TELs have been effective at restraining the growth of the overall burden of state and local government.

TELs: Why Some Succeed and Others Fail

Some TELs are more effective than others in restraining the growth rate of taxes and spending. In fact, some of the TELs included in this analysis were conclusively ineffective–most notably, those of Louisiana, Montana, and South Carolina (see Table A.2). The reasons some TELs succeed and others fail can be found in their design.

There are several criteria on which TELs may vary that can play a role in their ultimate effectiveness.[24] (Table 2 examines each of the 18 binding TELs included in this study on five of those factors.) The major issues in determining the effectiveness of TELs are discussed in the following subsections.

Table 2: Description of Binding Tax and Expenditure Limitations

State Year Constitutional/
Statutory
Initated by Approved by Limit Applies to
Arizona* 1978 Constitutional Legislature Voters Appropriations of state tax revenues
California 1979 Constitutional Voters Voters Appropriations of state tax revenues
Colorado* 1977 Statutory Legislature Legislature State general fund appropriations
Delaware 1980 Constitutional Legislature Legislature State general fund appropriations
Hawaii 1978 Constitutional Constituional Convention Voters State general fund appropriations
Idaho 1980 Statutory Legislature Legislature State general fund appropriations
Louisiana* 1979 Statutory Legislature Legislature State tax revenue
Massachusetts 1986 Statutory Voters Voters State revenue
Michigan 1978 Constitutional Voters Voters State revenue
Missouri 1980 Constitutional Voters Voters State revenue
Montana 1981 Statutory Legislature Legislature State appropriations
Oklahoma* 1985 Constitutional Legislature Voters State appropriations
Oregon 1979 Statutory Legislature Legislature State general fund appropriatioins
South Carolina 1980 Constitutional Legislature Legislature State appropriations
Tennessee 1978 Constitutional Constitutional Convention Voters Appropriations of state tax revenues
Texas 1978 Constitutional Legislature Voters Appropriations of state tax revenues
Utah 1979 Statutory Legislature Legislature State appropriations
Washington* 1979 Statutory Voters Voters State tax revenues
Source: Advisory Commission on Intergovernmental Relations, Significant Features of Fiscal Federalism, 1993, vol. 1, pp. 14-19 (and other years); Kenyon and Benker, p. 437.*These states have passed new measures or altered existing ones since 1990.
State Limit is Provisions for a Waiver
Arizona* Shall not exceed 7 percent of state personal income 2/3 approval of the legislature on specific additional appropriations
California Yearly growth shall not exceed the percentage increase in population and inflation Declaration of an emergency by a 2/3 vote and compensating reductions in spending over 3 following years
Colorado* Yearly growth shall not exceed 7 percent Statute may be amended by a majority vote of the legislature
Delaware Shall not exceed 98 percent of estimated general fund revenue and prior year’s unencumbered funds Declaration of an emergency and 3/5 vote of the legislature
Hawaii Yearly growth shall not exceed the average annual growth rate of state personal income over the preceding 3 calendar years 2/3 approval of the legislature on specific additional appropriations
Idaho Shall not exceed 5.33 percent of state personal income. 2/3 approval of the legislature on specific additional appropriations.
Louisiana* Shall not exceed FY 1978-79 state revenue as a share of 1997 state personal income, multiplied by state personal income in the prior calendar year Statute may be amended by a majority vote of the legislature; certain tax sources (i.e, severance tax revenue) are excluded from computation.
Massachusetts Yearly growth shall not exceed the average annual growth of wages and salaries over the previous 3 years. Statute may be amended by a majority vote of the legislature.
Michigan Shall not exceed FY 1978-79 state revenue of a share of 1977 state personal income in the prior calendar year or average state personal income over the previous 3 calendar years. Declaration of an emergency by governor and 2/3 vote of the legislature.
Missouri Shall not exceed FY1980-81 state revenue as a share of 1979 state personal income in the prior calendar year or average state personal income over the previous 3 calendar years. Declaration of an emergency by governor and 2/3 vote of the legislature.
Montana Biennial growth shall not exceed the percentage difference in the average state personal income over the 3 calendar years immediately preceding the biennium and the average state personal income over the 3 calendar years immediately preceding the current biennium. Declaration of an emergency by governor and 2/3 approval of the legislature on specific additional expenditures.
Oklahoma* Yearly growth shall not exceed 12 percent (adjusted for inflation) or state appropriations shall not exceed 95 percent of certified revenue. None
Oregon Biennial growth shall not exceed the growth rate of state personal income over the preceding 2 calendar years. Statute may be amended by a majority vote of the legislature.
South Carolina Yearly growth shall not exceed the average annual growth rate of state personal income over the preceding 3 calendar years, or state appropriations shall not exceed 9.5 percent of state personal income, whichever is greater. Declaration of an emergency and a 2/3 vote of the legislature;every 5 years the legislature may review the composition of the limit.
Tennessee Yearly growth shall not exceed the projected growth rate of state personal income for the calendar year in which the fiscal year begins. Majority vote of the legislature on a specific additional amount.
Texas Biennial growth shall not exceed the growth rate of state personal income. Declaration of an emergency and a majority vote of the legislature on a specific additional amount.
Utah Yearly growth may not exceed 85 percent of the increase in state personal income. Declaration of an emergency and 2/3 vote of the legislature; legislature must also hold a public hearing.
Washington* Yearly growth shall not exceed the average annual growth rate of state personal income over the preceding 3 calendar years. Declaration of an emergency by a 2/3 vote in the legislature and 2/3 approval of the legislature on specific additional appropriations.

Did the TEL Originate with the Voters or in the Legislature?

Where a TEL originates and who approves it differ from state to state. Whether a TEL originates with the voters or in the legislature can make a significant difference in its ultimate effectiveness. TELs that originate in the legislature, since they are written by politicians–the very people whose behavior they are intended to restrain–tend to be more vague, less restrictive, and more easily circumvented. In contrast, those originating with the voters usually have more teeth. Of the 18 TELs examined, 11 originated with the legislature and only 5 with the voters. The other two were initiated by constitutional convention. (See Table 2 for astate-by-state listing of who originated and who approved the 18 TELs examined herein.)

It should be noted here, however, that in 24 states citizens have no means by which to put an initiative or referendum on the ballot.[25] Such measures must be initiated by the legislature. Thus in those states, TELs that originate with the voters are not an option, although through alegislative referendum voters can at least have the opportunity to vote on a legislature-originated TEL. (Of some hope for those in noninitiative and referendum states is that, in the three states where TELs were initiated by the legislature but approved by the voters, spending growth did fall somewhat relative to the U.S. average.) Although severely handicapped, tax activists in noninitiative states can pressure their legislators to come up with a sound, well-designed TEL, in addition to pressing for a constitutional change granting citizens the right to put initiatives and referendums on the ballot.[26]

Finally, who approves the TEL is also important. Of the 18 TELs examined, 8 were approved by the legislature and 10 by the voters. Thus, while 3 of the 11 legislature-originated TELs were sent to the voters for approval, 8 never faced voter scrutiny, since they both originated in and were approved by the legislature. Only five TELs were both initiated and approved by the voters.

The same methodology used in the earlier sections reveals that in the five states where TELs were initiated and approved by the voters, spending growth slowed, relative to the U.S. average, while in the eight states where they were both initiated and approved by the legislature, spending growth actually rose, relative to the U.S. average. (The remaining five TELs were not initiated and approved by the same people but by some combination of groups including the voters, the legislature, and constitutional conventions.)

The five-year growth rate of per capita state spending in voter-initiated and voter-approved TEL states fell from 6.5 percentage points above the U.S. average before TEL enactment to 2.2 percentage points above the U.S. average after TEL enactment, a fall of 4.3 percentage points. In contrast, the five-year growth rate of spending in states where TELs were both initiated and approved by the legislature rose from 2.1 percentage points below the U.S. average before TEL enactment to 0.5 percentage points below the U.S. average after TEL enactment, an increase of 1.6 percentage points. These findings support Poulson’s theory that TELs initiated by the legislature “could actually erode the budget constraint resulting in an increase in the growth of state government.”[27]

The ideal TEL would originate with and be approved by the voters, where possible, rather than the legislature.

Is the TEL Constitutional or Statutory?

In addition to origin and approval, whether a TEL is statutory or constitutional is important. Constitutional TELs are difficult to change. On the other hand, statutory TELs leave open the possibility that the legislature will change the definition of the item limited–often by excluding certain areas of spending or revenue–or weaken the restrictiveness of the limit itself whenever legislators see fit. Thus, constitutional TELs are thought to be more effective than statutory TELs. Of the 18 TELs examined herein, 10 are constitutional and 8 are statutory. (See Table 2 for a state-by-state list.)

Again, the same methodology gives results that indicate that spending growth in the 10 constitutional-TEL states fell, relative to the U.S. average, more so than in the 8 statutory-TEL states.

The five-year growth rate of per capita state spending in constitutional-TEL states fell from 0.8 percentage points below the U.S. average before TEL enactment to 5.6 percentage points below the U.S. average after TEL enactment, a fall of 4.8 percentage points. In contrast, the five-year growth rate of spending in statutory-TEL states fell from 2.9 percentage points above the U.S. average before TEL enactment to 0.6 percentage points above the U.S. average after TEL enactment, a fall of only 2.3 percentage points.

The ideal TEL would be constitutional rather than statutory.

How Much of the Budget Is Being Limited?

Even the most stringent TELs do not pertain to the entire budget. Most apply solely to the general fund. Since, on average, about 44 percent of state-appropriated funds are outside the general fund, a substantial portion of the budget is left uncapped.[28] In fact, in some states the uncapped portion of the budget can be as large as 71 percent.[29] Often exempted are expenditures of special funds such as those earmarked for highways, education, and capital construction. Among the frequently exempted revenue items are federal aid, insurance trust funds, user fees, and earmarked funds.

Six of the 18 TELs examined here apply to state tax revenue.[30] Thus, those TELs do nothing to restrict the growth of nontax revenue–charges, user fees, and the like. Predictably, from 1980 to 1991, charges and miscellaneous general revenue rose as a share of total general revenue from 13.8 percent to 17.7 percent.[31]

The ideal TEL would apply a cap to 100 percent of the budget rather than to only certain categories.

Does the TEL Cap Spending or Revenue?

Whether a TEL applies to spending or revenue can also make a difference in its effectiveness. Of the 18 TELs examined here, 9 apply to spending (4 to appropriations and 5 to general-fund appropriations), and 9 apply to revenue in one way or another (3 to revenue, 2 to tax revenue, and 4 to appropriations of tax revenue).

Each fiscal year, states must estimate their revenues for the coming year, in part on the basis of forecasts of how the state’s economy will perform. Those economic forecasts, and hence the revenue estimates, are often quite inaccurate. Further, politicians can manipulate the economic forecasts in an effort to get around their TELs’ restrictions. Therefore, the use of revenue estimates as the base for a TEL is not ideal.

Those pitfalls can largely be avoided, however, by applying the TEL to spending, since the spending numbers for the coming fiscal year are far more certain.

The ideal TEL would cap spending rather than revenue or taxes.

What Is the Limit?

Another important factor is the definition of the limit itself. Most TELs–including 14 of the 18 TELs examined here–restrict state spending growth to the growth in state personal income. A few, however, use other limits such as population growth, inflation, or a fixed rate of growth. (See Table 2 for more details.)

Many argue that, of the wide variety of limits in use, those that restrict the growth of government to the rate of growth of personal income are the most appropriate since they prohibit the government from growing faster than the private economy. The fact that an overwhelming majority of TELs are so structured highlights the degree to which this argument has been accepted.

However, the evidence suggests that linking spending to population growth plus inflation is much more restrictive. To illustrate the different effects of those two types of limits–personal income linked versus population linked–Figure 8 shows the record of the 1980s. Throughout most of the 1980s the economy was booming, thus personal income rose at abnormally high rates, 30 percent in real terms from 1980 to 1990. In those prosperous times, government revenues were pouring in, allowing spending to skyrocket as well. Real state spending shot up by 42 percent from 1980 to 1990. Meanwhile, the U.S. population grew at only a modest rate of 10 percent.[32]

Figure 8
Growth in Population, Real Personal Income, and Real State Spending, 1980-90

Thus, a TEL limiting spending growth to the growth rate of personal income would have resulted in a slower rate of state spending growth over the last decade than occurred (30 percent compared to 42 percent). However, a TEL limiting the growth of state spending to the growth rate of population plus inflation would have provided a far stricter limit on real state spending growth, holding it to only 10 percent from 1980 to 1990, less than one-fourth the 42 percent rate at which it actually grew and one-third the rate at which a personal income-linked TEL would have allowed spending to grow. Thus, TELs limiting spending growth to the growth rate of population plus inflation are far preferable if the goal is to tame spending.

In fact, one of the reasons many studies have found TELs ineffective is that so many TELs are linked to personal income growth–which is hardly a restrictive limit. Since most TELs were in place by 1982, the evidence on spending growth since TEL enactment comes largely from the period of the 1980s when rapid growth of income accommodated the surge in spending.

For example, South Carolina has a personal income-linked TEL. The five-year growth rate of spending in South Carolina rose from 18.7 percentage points below the U.S. average before TEL enactment to 3.0 percentage points above the U.S. average after TEL enactment. By contrast, thefive-year growth rate of spending in California, which has a population- and inflation-linked TEL, fell from 9.4 percentage points above the U.S. average before TEL enactment to 5.9 percentage points below the U.S. average after TEL enactment.

The ideal TEL would limit the growth of spending to the growth rate of the population plus inflation rather than to the growth of personal income.

Can the TEL’s Restrictions Be Circumvented?

How easily politicians can get around the limits of a TEL is an important factor in determining how successful that TEL will be at restraining the growth of government. At the very least, the TEL should be binding. In two cases the limit applies only to the governor’s recommended budget and thus has virtually no teeth. (Nevada and Rhode Island have such nonbinding TELs, so as mentioned earlier, they were not included as TEL states in this study.)

Of the other TELs, only Oklahoma’s does not provide some mechanism by which the legislature can waive the restrictions of the TEL. Nine of the 18 TELs examined here first require the declaration of an “emergency.” However, no state has specified what constitutes an emergency.[33] Of the 18, 6 require only a majority vote to waive their TELs; 1 requires three-fifths approval; 9 require two-thirds approval; 1 requires two-thirds approval plus compensatingreductions over the following three years; and 1 has no waiver provisions. (See Table 2 for more details.)

The ideal TEL would require voter approval for its provisions to be circumvented.

Does the TEL Allow Cost Shifting to Local Governments?

Since the goal of a TEL is to restrict the growth of government, if state governments adhere to their TELs by shifting costs to local governments, the overall size of government will not have been restrained. In an effort to foil such attempts to ignore the true intent of TELs, 5 ofthe 18 TEL states examined here have adopted TELs that prohibit state governments from imposing unfunded mandates on local governments.[34]

Since localized government is preferable to centralized government, a prohibition of unfunded mandates, which by itself could prohibit such decentralization, may not be desirable. To address that, four of the five TELs that prohibit unfunded mandates do allow for transfer of responsibility–for both program financing and decisionmaking–to local governments. In those cases, the state spending limit is then adjusted downward.

Since most TELs do not apply to local governments, such decentralization could, through a disproportionate expansion in local government spending, lead to an increase in the overall level of state and local government spending. To prevent such expansion, TELs should apply to local governments as well.

Colorado’s Taxpayer Bill of Rights, passed in 1992, is a recent example of a TEL that applies to both state and local governments. Several of the prospective 1994 ballot measures do so as well.

The ideal TEL would apply to both state and local governments. And it would allow for transfer of responsibility to local governments and provide for the appropriate adjustments in each jurisdiction’s limit.

Does the TEL Require Additional Action to Be Implemented?

The manner in which a TEL is to be implemented is also of considerable importance. If the legislature must take additional action to make the TEL operative, it can create a major roadblock in the path toward fiscal restraint. Unfortunately, in several instances that has been the case.

For example, in Connecticut, as part of the 1991 deal to enact a new state income tax, Gov. Lowell Weicker agreed to a statutory TEL limiting the growth in general budget expenditures to the percentage increase in personal income or inflation (whichever was higher). A similar measure was passed as a constitutional amendment in 1992. However, the measure required that the general assembly define “general budget expenditures,” “increase in personal income,” and “increase in inflation.” The legislature has thus far refused to define those terms, and the state’s attorney general has ruled that until they do, the TEL is inoperative. Therefore, because of poorly designed implementation provisions, a TEL that voters approved by a four-to-one margin remains impotent.[35]

The ideal TEL would require no additional action by the legislature for implementation.

How Is the TEL Enforced?

Finally, enforceability plays a major role in determining the effectiveness of fiscal discipline mechanisms. If a TEL is not adhered to, it ceases to be useful. Thus, a TEL should clearly articulate what is to take place should the government violate the dictates of the TEL. Unfortunately, that is rarely the case. As a result, several states have simply ignored their TELs.

A case in point is Texas, where a constitutional TEL was passed by an overwhelming 84 percent majority in 1978. The TEL was adhered to in the first biennium to which it applied, but it has been ignored ever since.[36] While the Texas constitution is fairly clear on the precise course to be taken in the case of a violation of budgetary laws such as this one, the specific wording of the TEL itself does not mention enforcement mechanisms. In part as a result of that, the Texas Public Policy Foundation reports that “the Texas Reform Act is probably being violated at almost every level of the budget process,” leading the legislature’s biennial appropriations to exceed their limit by as much as $1.5 billion.[37]

To avoid that sort of enforceability problem, the text of a TEL should clearly state that taxpayers have legal standing to sue to enforce the TEL’s provisions.[38] In addition, TELs should require injunctive relief to prevent the illegal collection of taxes or appropriation of expenditures while suit is pending. Missouri’s Hancock II, an initiative seeking 1994 ballot status, is an example of a TEL that contains such provisions.[39]

The ideal TEL should give taxpayers standing to sue to enforce its provisions and require injunctive relief to prohibit any illegal taxes or spending while such suits are pending.

The Ideal TEL

The ideal TEL should have the following characteristics.[40]

  1. It should originate with and be approved by the voters, where possible, rather than the legislature.
  2. It should be constitutional rather than statutory.
  3. It should apply a cap to 100 percent of the budget rather than to only certain categories.
  4. It should cap spending rather than revenue or taxes.
  5. It should limit the growth of spending to the growth rate of population plus inflation rather than to the growth of personal income.
  6. It should require voter approval for its provisions to be circumvented.
  7. It should apply to both state and local governments. And it should allow for transfer of responsibility to local governments and provide for the appropriate adjustments in each jurisdiction’s limit.
  8. It should not require additional action by the legislature for implementation.
  9. It should give taxpayers standing to sue to enforce its provisions and require injunctive relief to prohibit any illegal taxes or spending while suit is pending.

Do TELs Have a Useful Life Span?

It is often argued that TELs are less effective over the long run than they are when first implemented. Part of the reason for that is that many TELs are statutory and can be amended by the legislature at any time. Thus, since TELs are often weakened over time–through exclusions of additional areas of spending or revenue to which the limit applies or through outright alterations of the limit itself–it is expected that their effectiveness will decline as well.

Examination of the 15 binding TELs in place by 1980 indicates that spending growth is indeed restrained more over the first five years after TEL enactment than over the second five years.[41] The real growth rate of per capita state spending in the 15 states with binding TELs in place by 1980 was 3.5 percentage points below the U.S. average from 1980 to 1985 (6.3 percent vs. 9.8 percent) but 0.4 percentage points above the U.S. average from 1985 to 1990 (16.7 percent vs. 16.3 percent).

California–where a constitutional TEL was enacted in 1979–is one example of a state whose TEL has substantially lost effectiveness over time, as more and more spending has been moved outside the purview of the limit. For example, Proposition 98, passed in 1988, required that a large portion of the state budget go to education, in effect crowding out spending on other things such as streets, highways, sewers, and police protection. The resulting demands for more spending on those areas were then often met with specific earmarked local taxes, thus increasing the overall burden of state and local government. Further, Proposition 99 increased the cigarette tax but excluded that revenue from the general fund, designating it instead for grants to health organizations, thus exempting it from the TEL’s cap.[42] As a result, despite the presence of a constitutional TEL, state spending in California continued to rise dramatically throughout the 1980s.

The erosion of TEL effectiveness over time can be linked in part to the culture of spending in state capitals, in which politicians will do whatever it takes to avoid having their spending powers restrained. However, it can also be traced to poor design. A major loophole in every existing TEL is the lack of a cap applying to the entire budget.

For instance, California’s TEL applied only to “appropriations of state tax revenue.” Others apply only to “state general fund appropriations.” As a result, government can be and has been expanded in such states, despite the presence of a TEL, by increasing nontax revenue (e.g., charges and user fees) and excluding certain categories of spending from the general fund. That loophole is probably the single biggest contributor to the limited effectiveness of TELs, especially over time.

Perhaps the most important factor in preventing the erosion of the effectiveness of a TEL is making sure that the language of the TEL clearly states that the cap applies to “100 percent of state expenditures.” Inclusion of that language and the other characteristics of the ideal TEL outlined in the preceding section would go a long way toward ensuring that TELs do indeed have a long useful life span.

Other Measures of Fiscal Restraint

Well-designed TELs can impose significant fiscal restraint on a state’s budgetary process. However, other useful measures exist as well. Two such measures are super-majority requirements and voter approval requirements for increasing existing taxes or imposing new taxes. Table 3 is a list of the states that have at least one of those three (including TELs) measures of fiscal restraint.

Table 3: Fiscal Discipline Mechanisms in the States
State
Tax & Expenditure Limit
Supermajority Requirement
Voter Approval Requirement
Alaska
X
Arizona
X
X
Arkansas
X
California
X
X
Colorado
X
X
Connecticut
X
Delaware
X
X
Florida
X
*
Hawaii
X
Idaho
X
Louisiana
X
X
Massachusetts
X
Michigan
X
Mississippi
X
Missouri
X,*
*
Montana
X
*
*
Nevada
X
*
North Carolina
X
North Dakota
*
Oklahoma
X
X
X
Oregon
X
*
Rhode Island
X
South Carolina
X
South Dakota
X
Tennessee
X
Texas
X
Utah
X
Washington**
X
X
Total in 1994
23
9
3
1994 ballot measures
1
2
5
Note: The following states have none of these three fiscal discipline mechanisms currently in place or on the ballot in 1994: Alabama, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Maine, Maryland, Minnesota, Nebraska, New Hampshire, New Jersey, New Mexico, New York, Ohio, Pennsylvania, Vermont, Virginia, West Virginia, Wisconsin, Wyoming.

* Measures seeking 1994 ballot status (source: Americans for Tax Reform)

**Washington State’s Initiative 601, passed in 1993, requires voter approval for tax increases that cause spending to exceed the spending limit (population growth plus inflation) but not for all tax hikes.

Supermajority Requirements for New or Increased Taxes

By requiring more than a simple majority (usually a two-thirds majority) to raise existing taxes or impose new ones, supermajority requirements force legislators to reach a broader consensus on the necessity for higher taxes and the wisdom of the spending those taxes will fund.[43] A more sound fiscal policy is the likely result. Nine states have such requirements, two of which were enacted in 1992. In 1994 voters in two states–Montana and Nevada–may have the opportunity to pull the lever in support of supermajority requirements.[44]

Voter Approval Requirements for New or Increased Taxes

Another fairly new fiscal discipline measure requires voter approval to increase existing taxes or impose new ones. In March 1992 Oklahoma kicked off this popular and populist movement by passing a constitutional amendment that requires voter approval of any tax hike that does not pass each house of the legislature by at least a three-fourths vote. Colorado went even further in November 1992 with passage of the Taxpayer Bill of Rights, a constitutional amendment that requires voter approval of any increase in state or local taxes. In 1994 there may be as many as five state ballot initiatives that would require voter approval for new or increased taxes.[45]

Voter approval requirements (VARs) have the further appeal of reconnecting the voters with their governments. Politicians who wish to raise taxes now have to convince only their fellow legislators of the wisdom of such a move. With a VAR, however, would-be tax-hiking politicians would have to take their case to the people. They would be forced to convincingly explain to their constituents why the money is needed and where it will be spent. That is rarely easy.

Of course, VARs are not without their weaknesses. For example, since most VARs merely restrict the growth of tax rates, they would do nothing to prohibit the growth of nontax revenue.[46] As mentioned earlier, charges, fees, and miscellaneous general revenues have been growing as a share of total general revenue. Thus, the restrictions of most VARs could be circumvented by continuing to increase those types of revenues.

Still, measures that require voter approval for increasing existing taxes or imposing new ones provide a powerful method to restrain the growth of state government. Further, VARs are very popular with voters. A recent national poll found that 66 percent of Americans favor requiring tax increases to be approved by a majority vote of the people.[47] The popular appeal of VARs makes it probable that they will follow the path of the term-limits movement. That is, they will most likely pass by wide margins everywhere they are on the ballot in 1994 and be adopted by many more states in the years to come.

Conclusion

TELs, as we know them, are no silver bullet. Even their staunchest supporters will admit that TELs have not slowed the growth of taxes and spending as much as their advocates would have liked. Some TELs, in fact, have been clearly ineffective. However, the ineffective TELs tend tobe the ones that are plagued by specific elements of poor design. For example, they are usually statutory rather than constitutional and thus are designed by the very politicians whose behavior they are intended to restrain. As a result, the cap frequently excludes large areas of the budget, and the TEL is often written in a manner that makes circumventing or even changing its limit quite easy.

Nevertheless, as this study has shown, TELS–despite their substantial flaws–can work. They can slow the rate of growth of taxes and spending, relative to the rest of the nation, and they can do so without shifting massive costs to local governments. In addition, though all existing TELs have notable flaws that limit their effectiveness, the better designed TELs are much more effective than are those that are designed poorly. Furthermore, TELs with the features of the ideal TEL described herein would have an even greater impact.

This fall voters in as many as six states will have the opportunity to pass some type of tax limitation measure. People opposed to TELs–career politicians, lobbyists, and others–will go to great lengths to scare voters into thinking TELs are damaging. The evidence presented here suggests just the opposite. By restraining the ability of politicians to continue to allow taxes and spending to grow unchecked, TELs can finally provide the beleaguered taxpayer some much-needed relief from the crushing burden of state taxes.

Appendix: Detailed Tables
The tables in this appendix provide more detailed information on TELs. Tables A.3 through A.6 give the results of four different measures of changes in taxing and spending.

Table A.1:
Tax Initiatives Seeking Ballot Status in 1994
State
Initiative
Florida Voter approval requirement
Missouri Tax/expenditure limitation and voter approval requirement
Montana Voter approval requirement
Supermajority requirement
Nevada* Supermajority requirement**
North Dakota Voter approval requirement
Oregon Voter approval requirement**
Source: Americans for Tax Reform.

Note: Information is correct as of July 11, 1994.

*State law in Nevada requires that all ballot measures be approved in two consecutive general elections before taking effect. This measure will be seeking its first such approval.

**On ballot.

Table A.2
Per Capita State Government Spending and Five-Year Growth Rates Relative to U.S. Average, before and after TEL Enactment
Per Capita Spending
Five-Year Growth Rate
Change in Five-Year Growth Rate Relative to U.S. Average
5 Years before TEL
Year of TEL
5 Years after TEL
5 Years Preceding TEL
% Points above/below U.S. Average
5 Years Following Enactment
% Points above/below U.S. Average
1972 1977 1982 1972-77 1972-77 1977-82 1977-82
Colorado
$481
$748
$1,113
+55.5%
-6.3 %
+48.8%
-6.1%
+0.1%
U.S. avg.
$476
$770
$1,193
+61.8%
+54.9%
1973 1978 1983 1973-78 1973-78 1978-83 1978-83
Arizona
$500
$811
$1,085
+62.2%
+2.2%
+33.8%
-13.9%
-16.1%
Hawaii
$1,075
$1,520
$1,932
+41.4%
-18.6%
+27.1%
-20.5%
-2.0%
Michigan
$571
$910
$1,340
+59.4%
-0.6%
+47.3%
-0.4%
+0.2%
Tennessee
$386
$653
$867
+69.2%
+69.2%
+9.2%
+32.8%
-14.9%
Texas
$364
$620
$898
+70.
+10.4%
+44.8%
-2.8%
-13.2%
U.S. avg
$517
$827
$1,221
+60.0%
47.6%
1974 1979 1984 1974-79 1974-79 1979-84 1979-84
California
$655
$1,114
$1,537
+70.1%
+9.4%
+38.0%
-5.9%
-15.3%
Louisiana
$594
$939
$1,504
+58.1%
-2.6%
+60.2%
+16.3%
+18.8%
Oregon
$573
$996
$1,388
+73.8%
+13.2%
+39.4%
-4.5%
-17.7%
Utah
$580
$974
$1,350
+67.9%
+7.3%
+38.6%
-5.3%
-12.6%
Washington
$642
$1,064
$1,525
+65.7%
+5.1%
+43.3%
-0.5%
-5.6%
U.S. avg.
$569
$914
$1,315
+60.6%
+43.9%
1975 1980 1985 1975-80 1975-80 1980-85 1980-85
Delaware
$889
$1,378
$2,011
+55.0%
-0.1%
+45.9%
+2.5%
+2.6%
Idaho
$654
$971
$1,250
+48.5%
-6.7%
+28.7%
-14.7%
-8.1%
Missouri
$466
$736
$1,082
+57.9%
+2.8%
+47.0%
+3.5%
+0.8%
South Carolina
$658
$898
$1,315
+36.5%
-18.7%
+46.4%
+3.0%
+21.6%
U.S. avg.
$651
$1,010
$1,449
+55.1%
+43.5%
1976 1981 1986 1976-81 1976-81 1981-86 1981-86
Montana
$770
$1,181
$1,705
+53.4%
-3.0%
+44.4%
+4.9%
+8.0%
U.S. avg
$718
$1,123
$$1,566
+56.4%
+39.4%
1980 1985 1990 1980-85 1980-85 1985-90 1985-90
Oklahoma
$948
$1,323
$1,784
+39.6%
-3.9%
+34.8%
-6.4%
-2.5%
U.S. avg.
$1,010
$1,449
$2,047
+43.5%
+41.3%
1981 1986 1991 1981-86 1981-86 1986-91 1986-91
Massachusetts
$1,265
$1,963
$3,046
+55.2%
+15.7%
+55.2%
+14.4%
-1.3%
U.S. avg.
$1,123
$1,566
$2,204
+39.4%
+40.7%
18-state avg.
+0.8%
-2.9%
-3.7%
Note: Spending is per capita state “total general expenditure.” The “% points above/below” and the “change” numbers were calculated using unrounded values for the various growth rates.
Table A.3
Growth Rates of Taxes and Spending for the Five Years Immediately Preceding and the Five Years Immediately Following TEL Enactment
Preceeding Enactment
Following Enactment
Change
Real Five-Year Change
Per capita state spending
7.1%
1.8%
-5.3% pts
Per capita state taxes
11.9%
-2.8%
-14.6% pts
Per capita state and local spending
6.1%
2.4%
-3.7% pts
Five-Year Change Relative to Change in U.S. Average
Per capita state spending
+0.8% pts
-2.9% pts
-3.7% pts
Per capita state taxes
+4.0% pts
-8.1% pts
-12.1% pts
Per capita state and local spending
+2.3% pts
-1.2% pts
-3.5% pts
Five-Year Change Relative to Change in Non-TEL Average
Per capita state spending
-1.5% pts
-4.6% pts
-3.1% pts
Per capita state taxes
+5.5% pts
-12.5% pts
-18.0% pts
Per capita state and local spending
-1.8% pts
-3.5% pts
-1.7% pts
Note: All figures refer to the average for the 18 states with binding TELs examined herein. The “change” numbers were calculated using unrounded values for the various growth rates and levels of taxes and spending.
Table A.4
Growth Rates of Taxes and Spending for the Five Years Immediately Preceding and the Years Since TEL Enactment
5 Years preceding Enactment
Since Enactment
Change
Change Relative to Change in U.S. Average
Per capita state spending
+0.8% pts
-12.1% pts
-12.9% pts
Per capita state taxes
+4.0% pts
-7.8% pts
-11.8% pts
Per capita state and local spending
+2.3% pts
-10.2% pts
-12.5% pts
Change Relative to Change in Non-TEL Average
Per capita state spending
-1.5% pts
-13.9% pts
-12.4% pts
Per capita state taxes
+5.5% pts
-13.2% pts
-18.7% pts
Per capita state and local spending
-1.8% pts
-11.3% pts
-9.5% pts
Note: All figures refer to the average for the 18 states with binding TELs examined herein. The “change” numbers were calculated using unrounded values for the various growth rates and levels of taxes and spending.
*Most recent state spending and tax figures are for 1992. State and local spending figures for 1992 are not yet available, so 1991 numbers were used.
Table A.5
Levels of Taxes and Spending in the Year of TEL Enactment and Five Years Later
Year of Enactment
5 Years after Enactment
Change
Percent above/below U.S. Average
Per capita state spending
+6.4% pts
+4.2% pts
-2.3% pts
Per capita state taxes
+3.9% pts
-1.8% pts
-5.8% pts
Per capita state and local spending
-0.1% pts
-1.0% pts
-1.0% pts
Percent above/below Non-TEL Average
Per capita state spending
+4.7% pts
+1.3% pts
-3.4% pts
Per capita state taxes
+8.8% pts
-0.2% pts
-8.9% pts
Per capita state and local spending
+3.2% pts
+0.5% pts
-2.6% pts
Note: All figures refer to the average for the 18 states with binding TELs examined herein. The “change” numbers were calculated using unrounded values for the various growth rates and levels of taxes and spending.
Table A.6
Levels of Taxes and Spending in the Year of TEL Enactment and the Most Recent Year
Year of Enactment
Most Recent Year
Change
Percent above/below U.S. Average
Per capita state spending
+6.4% pts
+1.7% pts
-4.7% pts
Per capita state taxes
+3.9% pts
+0.7% pts
-3.2% pts
Per capita state and local spending
-0.1% pts
-4.4% pts
-4.3% pts
Percent above/below Non-TEL Average
Per capita state spending
+4.7% pts
-0.6% pts
-5.3% pts
Per capita state taxes
+8.8% pts
+3.0% pts
-5.8% pts
Per capita state and local spending
+3.2% pts
-1.7% pts
-4.8% pts
Note: All figures refer to the average for the 18 states with binding TELs examined herein. The “change” numbers were calculated using unrounded values for the various growth rates and levels of taxes and spending.
*Most recent state spending and tax figures are for 1992. State and local spending figures for 1992 are not yet available, so 1991 numbers were used.

Published in: on January 18, 2008 at 8:21 am  Leave a Comment  

• Hancock Amendment Loophole

Missouri’s Hancock II Amendment:

The Case For Real Reform

by Dean Stansel

Dean Stansel is a fiscal policy analyst at the Cato Institute.


Executive Summary

In November 1980 Missouri voters approved the Hancock amendment, a constitutional amendment intended to prevent the Missouri state budget from growing faster than the Missouri family budget. Since then the effectiveness of that amendment has been eroded as legislators have discovered ways to evade its restrictions by exempting certain revenues from the cap. Those evasions have cost Missourians $5 billion in higher taxes.

On November 8 voters in Missouri can repair the Hancock amendment by enacting the Hancock II amendment. Because it more precisely defines “total state revenue,” Hancock II would be more difficult for politicians to evade.

The opposition’s scare tactics–claiming that Hancock II will require a $1-billion tax refund and necessitate massive spending cuts and service disruptions–are inaccurate and misleading. Any reduction in spending that may be necessary to comply with Hancock II would be only about one- eighth the size of the opposition’s alarmist predictions.

Introduction

Missouri is one of 23 states that have some form of tax and expenditure limitation (TEL) to restrict the growth of the state budget. In November 1980 Missouri voters approved a constitutional amendment–called the Hancock amendment after its sponsor, Mel Hancock–that prevents the state government from increasing the percentage of residents’ incomes taken as state revenues without voter approval.

Like most TELs, the Hancock amendment was initially effective at restraining the growth of state taxes and spending. However, over the years that effectiveness has been eroded as legislators–aided by sympathetic court rulings– have discovered ways to evade the voter-imposed restrictions by exempting certain revenues from the cap.(1) For example:

* In 1982 only 2 percent of Missouri state revenue was considered exempt from the revenue limit. In 1993 the uncapped portion was nine times higher, or 18 percent.

* Increasing the amount of revenue excluded from the revenue limit has allowed Missouri’s state politicians to collect $5 billion more in revenue over fiscal years 1982- 93, than the Hancock amendment would have permitted.

* Since the Hancock amendment took effect, state own- source revenue, on a per capita basis, has risen 56 percent, the third fastest rate of state tax growth in the nation.

* Though state revenue was not supposed to rise faster than Missouri residents’ incomes, between 1982 and 1993 state revenue grew by 134 percent while Missouri personal income grew by only 112 percent.

* In FY95 alone, due in part to state senate bill 380– a $310-million tax hike passed in 1993 but not approved by the voters–state revenue will rise 9.4 percent, more than double the 4.1 percent rise in Missourians’ incomes.

Many Missouri residents would like to restore the integrity of the original Hancock amendment (Hancock I hereinafter). To that end, a new amendment, Hancock II, has been placed on the ballot this year. Because it provides a more precise definition of “total state revenue”–the item being limited–Hancock II would plug the loopholes that have substantially undermined the effectiveness of Hancock I.

One of the leading critics of Hancock II has claimed that the measure will require an immediate taxpayer refund of $1 billion and that it will “completely change the way the state does business.” However, as this analysis shows, the opposition’s scare tactics are inaccurate and misleading. Any reduction that might be necessary to comply with Hancock II’s restraints would be only about one-eighth the size of the opposition’s alarmist predictions. Such a cut would not be as much evidence that Hancock II is a draconian measure as it would be indicative of just how successfully state politicians have been able to evade the voter-imposed restrictions of Hancock I. Hancock II would simply enforce the constitutional requirement that the Missouri state budget not grow faster than the Missouri family budget.

How Politicians Avoid the Constraints of Voter-Imposed Tax and Spending Limits

In 1978 the passage of California’s revolutionary Proposition 13–which rolled back property taxes and severely restricted their rate of annual growth–launched a grassroots citizens’ tax revolt that swept across the nation. By 1982, 20 states–including Missouri–had adopted some form of TEL. Although those measures were initially effective at reining in the growth of state government, over the years their effectiveness has been eroded as big-spending politicians have discovered ways to evade the restrictions.

For example, since many TELs apply (or are interpreted as applying) to only the general fund, one common way of circumventing a spending cap has been to set up new “special funds,” which, by definition, are exempt from the cap. Similarly, state legislatures have enacted “earmarked” taxes, the revenue from which is set aside in a separate fund, exempt from most voter-approved caps. Such end-runs around the will of the people have eviscerated nearly all of the Proposition 13-era tax and spending limits, including Missouri’s Hancock I.

Evidence that the effectiveness of TELs declines over time can be found by examining spending growth in the 15 states that had binding TELs in place by 1980.(2) From 1980 to 1985 the real growth rate of per capita state spending in those states was 3.5 percentage points below the U.S. average (6.3 percent vs. 9.8 percent). However, from 1985 to 1990 spending in those states actually rose faster than the U.S. average (16.7 percent vs. 16.3 percent).(3)

It seems that no matter how explicitly voters try to constrain the tax and spending powers of state government, politicians eventually find ways to circumvent those constraints.

Missouri’s Hancock Amendment (1980): A History of Evasion

Missouri’s original Hancock amendment, passed by the voters in 1980, has been routinely thwarted by the Missouri legislature. Hancock I was intended to prohibit the state legislature from increasing the percentage of Missourians’ income taken as state revenue. (In that way it was similar to many of the other Proposition 13-era TELs.) Beginning with fiscal year 1982 (the first full fiscal year after Hancock I passed), that ratio was not allowed to rise above its level in FY81, when total state revenue consumed 5.64 percent of personal income.(4) In each fiscal year thereafter, the revenue limit was to be determined by multiplying the relevant personal income amount by the original ratio of 5.64 percent.(5)

Hancock I defined the specific item it intended to limit, total state revenue, as follows.

“Total state revenues” includes all general and special revenues, licenses, and fees, excluding federal funds, as defined in the budget message of the governor for fiscal year 1980-1981. Total state revenues shall exclude the amount of any credits based on actual tax liabilities or the imputed tax components of rental payments, but shall include the amount of any credits not related to actual tax liabilities.(6)

Apparently, that language was not explicit enough for state officials. In its first annual review of Hancock I, the state Auditor’s Office described the situation as follows.

The amendment, beyond the language above [section 17 (1), above], is not specific as to the types of revenues that are included or excluded in determining TSR [total state revenue]. Further, the amendment does not specify the methodology to be used in determining TSR. Consequently, the division (7) [Missouri budget office] established procedures to calculate TSR. The division also had to make certain decisions as to items that would be either included or excluded, except for items ruled on by the attorney general or the Missouri courts. (8)

Much of the confusion stemmed from the failure of the legislature to enact implementing legislation. That left unanswered the question of which agency was responsible for enforcing and monitoring the state’s compliance with the amendment. The Missouri budget office, an executive-branch agency under the control of the governor, took upon itself the responsibility of fulfilling that crucial role. Nevertheless, the state Auditor’s Office has also tried to define the revenue limit by producing its own annual reports on Hancock I. Those reports have often been in disagreement with the findings of the budget office. As a result, there is no consensus on what “total state revenue” is each year, nor on whether or how much the limit has been exceeded. Much of that confusion could have been avoided if the legislature had simply passed implementing legislation, something it still has not done after 14 years.

The problem was complicated by the passage, in November 1982, of Proposition C, the first major voter-approved tax hike since the passage of Hancock I. Proposition C was a $0.01 sales tax hike, 1/2õ of which was earmarked to roll back local property taxes and the other 1/2õ of which was devoted to public schools.(9) The Missouri budget office asserted that since Proposition C was approved by the voters, it was not subject to the revenue limit. The state Auditor’s Office concurred, stating that “including voter approved increases as TSR achieves the illogical result that voters agreed to additional taxes so they could receive a refund.”

That analysis misses the point. Proposition C did not include a provision excluding its revenue from the Hancock limit. Thus, all that voters approved in passing Proposition C was a statutory $0.01 sales tax hike earmarked for particular purposes. They clearly did not endorse excluding that revenue from the limit. Further, as a statute, Proposition C can have no bearing on the constitutional revenue limit that voters approved when they passed the Hancock amendment in 1980. If Proposition C had caused total revenue to exceed the limit, the legislature could have complied with Hancock I by cutting other nondedicated taxes.

Nevertheless, the Missouri Supreme Court, in Goode v. Bond (1983), agreed with the budget office’s contention that voter-approved tax increases–even statutory ones–should not be subject to the revenue limit.(10) That ruling created a loophole in the Hancock amendment. Further, it indicated to state politicians who disliked the constitutional constraints of the Hancock amendment that they could evade those constraints without actually amending the constitution. That could be achieved by sending statutory tax increases–for example, ones dedicated to high-priority programs such as schools, roads, and prisons–to the voters for approval. If approved, those sources of revenue, as Proposition C was, would be exempt from Hancock’s constitutional revenue cap. In essence, Goode v. Bond told politicians that they could amend the state constitution with a statute.

Not surprisingly, since that court ruling, numerous tax-hike proposals have appeared on the ballot. Three such proposals were approved by the voters as constitutional amendments, the language of which clearly excluded their revenues from the Hancock revenue limit.(11) However, like Proposition C, Proposition A–a motor fuel tax–was statutory and did not contain any provision for excluding its revenue from the Hancock revenue limit. Thus, although voters did approve those specific tax hikes, they did not approve excluding those revenues from the limit. Stated differently, by approving Propositions A and C, voters did not approve an overall increase in the tax revenue limit under Hancock, though in effect that is what they have gotten.

In FY95 alone those two sources of revenue that the court excluded from the limit are expected to cost Missouri residents over $650 million in extra taxes.(12) That amounts to $125 in higher taxes for every man, woman, and child in Missouri. The next section will shed more light on just how damaging the court’s ruling in Goode v. Bond has been to Missouri’s taxpayers.

The Cost of TEL Evasion

Most observers agree that the current tax burden in Missouri is lower than it would have been without the Hancock amendment.(13) Nevertheless, over the years, thanks to the loophole described above, the amendment’s effectiveness at restraining the growth of taxes and spending has been substantially reduced. As a result, despite the fact that voters approved a constitutional limit to the growth of the state budget, taxes and spending have continued to climb in Missouri.

As Table 1 shows, from 1982–the year the Hancock amendment went into affect–to 1992, Missouri’s spending growth far outpaced that of its Plains State neighbors and the rest of the country.(14) After adjusting for inflation:

* Missouri’s state budget grew by 63 percent–the 15th fastest in the United States–while the Plains State average grew by only 40 percent.

* Per capita state spending in Missouri rose by 54 percent–8th fastest in the nation–compared to only 31 percent for the Plains State average.

* State spending as a share of personal income rose by 22 percent in Missouri–11th fastest in the country–while the Plains State average rose by only 13 percent and the U.S. average by only 12 percent.

As Table 2 indicates, the same pattern holds true for state revenue, which Missouri residents voted to cap in 1980.(15) From 1982 to 1992, after adjusting for inflation:

* Total own-source revenue in Missouri rose by 65 percent–15th fastest in the U.S.–while the Plains state average rose by only 45 percent.(16)

* On a per capita basis, state own-source revenue in Missouri climbed 56 percent–3rd fastest in the nation– compared to only 31 percent for the Plains State average.

* State own-source revenue as a share of personal income soared by 24 percent in Missouri–10th fastest in the country–while the Plains State average rose by only 13 percent and the U.S. average by only 10 percent.

Clearly, taxes and spending continue to spiral out of control even with the Hancock limit. That growth of taxes and spending is not what Missouri voters intended when they approved Hancock I in 1980. Excessive growth has been caused largely by the court’s ruling on the definition of revenue, which excluded revenue from voter-approved tax hikes. Table 3 shows the effect of that redefinition of “total state revenue.” (Note: these figures are in current dollars, that is, they have not been adjusted for inflation. Thus the accumulated cost to the taxpayer of evasions of the Hancock limit is actually substantially larger than it appears herein.)

* The percentage of state own-source revenue(17) considered exempt from the cap skyrocketed from 2 percent in 1982 to 22 percent in 1987. Since then that figure has leveled off at about 18 percent, nine times higher than in 1982.

* Over the period FY1982-93, the redefinition of “total state revenue” exempted $4.9 billion in state revenue from the cap.

As Table 4 shows that , contrary to the voters’ stated intent in passing the Hancock amendment, political end-runs and anti-taxpayer court decisions have allowed state revenue growth to significantly outpace the growth of Missourians’ personal income. (Note: as in Table 3, these figures are in current dollars.)

* Total state revenue was supposed to increase only as fast as Missouri residents’ incomes. However, between 1982 and 1993 state revenue grew by 134 percent while Missouri personal income grew by only 112 percent.(18)

* Beginning in FY83, only one year after the Hancock amendment went into effect, total state revenue has exceeded the cap every year. The most recent final budget numbers show that the cap was exceeded by nearly $400 million in FY93 alone.(19)

* If the intended definition of “total state revenues” had been adhered to, Missouri residents would have paid $3.7 billion less in taxes over the period 1982-93.(20)

* In FY95 alone, due in part to Senate Bill 380–a $310-million tax hike for education, passed, but not approved by the voters, in 1993–state revenue will rise 9.4 percent, more than double the 4.1 percent rise in Missourians’ incomes.(21)

In sum, state politicians have been very successful at ignoring the original Hancock amendment’s call for budget discipline. That amendment merely asked the state government to prevent the budget from growing faster than Missouri residents’ ability to pay for it. Indeed, several states have more stringent caps, such as those that restrict revenue growth to the rate of population growth plus inflation. Nevertheless, even Missouri’s modest provision could not be adhered to. Despite the clear pattern of abuses, Missouri’s legislators continue to claim that the Hancock revenue limit has never been exceeded.(22)

Hancock II: Requiring Voter Approval for New Taxes

In Missouri, as in some 20 other states, politicians have thwarted the will of the people by plainly violating voter-imposed tax and spending limits. In many of those other states voters have approved new amendments to plug the loopholes that were created in their existing TELs. For example, just last year voters in Washington state approved an amendment that limits the growth of state spending to the growth rate of population plus inflation. A similar measure was passed in Colorado in 1992.(23)

This November Missouri’s taxpayers will have an opportunity to tighten the constraints of Hancock. As the previous section has documented, the original Hancock amendment has been severely weakened, costing Missouri’s taxpayers billions of dollars in higher taxes over the past decade. Those taxpayer losses continue to rise every year. In an attempt to restore the integrity of the original Hancock amendment, the Hancock II amendment has been offered. Hancock II would close many of the loopholes that court rulings and political end-runs have created over the years, thereby making it more difficult for politicians to defy the will of the people.

The new amendment is very similar to the first one. However, as have taxpayer activists in many states, those in Missouri have learned from past experience and written an amendment that is more precise and thus more difficult for politicians to evade. Hancock II would make two main changes:

1. Its definition of “total state revenue”–the specific item being limited–is significantly more precise. Unlike the original amendment, Hancock II explicitly provides that the constitutional revenue limit cannot be exceeded simply by the voters’ passing a statutory tax hike (as occurred with Propositions C and A).

2. As did the original, Hancock II contains a voter approval requirement. If politicians wish to increase the percentage of residents’ incomes taken as state revenue, they must first obtain the permission of the people who pay those taxes, the voters of Missouri. Such provisions are increasingly popular; they have recently been adopted by several other states and will be on the ballot in many more this year and in the years to come.

The Opposition to Tax Restraint

Despite the reasonableness of measures such as Hancock II, which cap revenue at the rate of income growth, the opposition to such measures is enormous. The most vocal opposition comes from those who benefit directly from government spending, including career politicians, lobbyists, teachers’ unions, and government workers. Since those groups have a stake in seeing that government revenue and spending grow, they have tended to campaign strongly against fiscal limitations in Missouri and elsewhere.(24) To overcome the populist appeal of TELs, the opposition frequently resorts to trying to scare voters about the consequences of such measures. They often claim that the TEL would force politicians to make massive cuts in essential government services.

In Missouri the opposition to Hancock II is led by various Missouri educational associations, public employee unions, and organizations that do business with the state. Those groups have organized and funded the Committee to Protect Missouri’s Future. That group commissioned a report estimating the impact of Hancock II on the state budget. The report, written by James Moody, a lobbyist in Jefferson City, has become known as the Moody report. Moody’s clients have included several organizations seeking to do business with the state government (for example, firms seeking contracts or leases with state agencies). Moody has worked as a state government administrator for both Democratic and Republican administrations. He is the furthest thing from an unbiased observer.

The Moody report claims that, because Hancock II implements the original intent of Hancock I by eliminating existing loopholes in the definition of “total state revenue,” the new measure will require a spending cut–and revenue refund–of $1.024 billion in FY96.(25) After accounting for monies that are constitutionally earmarked for specific purposes or otherwise exempt from spending reductions, Moody alleges that the result will be an across-the-board cut of 32.36 percent in spending for many of the most popular government services, such as highways, schools, colleges, and prisons. The report goes on to editorialize about the potential impact of those budget cuts. For example, Moody claims:

With this reduction, it appears certain that Missouri will not match all available federal [highway] funds, thereby eliminating necessary improvements to Missouri roads and sending the federal funds for Missouri to other states.(26)

Elementary and Secondary Education will be reduced by $284.6 million, and this reduction could renew litigation regarding the inadequacy of funding for this purpose.(27)

The quality and delivery system for higher education in Missouri would be shaken to its very foundation. The only feasible approach may to be consider the complete closure of state colleges or universities or community colleges.(28)

The likely policy reaction to a reduction of $55.42 million [for corrections] would be an enormous reduction in prison bed spaces and shorter sentencing due to a lack of capacity.(29)

The impacts on every department listed above would be dramatic, and may bring their activities nearly to a halt.(30)

The Moody report paints a frightening picture of what would happen if Hancock II passed, one that virtually no one would like to see become a reality. Those conclusions have received widespread media attention all over the state.

Fortunately for Missouri’s taxpayers, Moody’s analysis is seriously flawed. His assertion that the passage of Hancock II will require massive cuts in state services is inaccurate and misleading.

Assessing the Moody Report

The Moody report claims that the passage of Hancock II will require a tax refund (and thus a spending cut) of $1.024 billion in FY96. Table 5 shows how that number was derived. As discussed earlier, the main purpose of Hancock II is to return to Hancock I’s intended definition of “total state revenue.” As a result, certain revenues that the court has interpreted as exempt from the cap are intended to be brought back under Hancock II’s cap. In Table 5, Moody’s estimates of those amounts are shown as “new revenues included by Hancock II.” According to Moody’s calculations, adding that “new” revenue to “total state revenue” (as currently defined by the Missouri budget office) causes the sum to exceed the revenue limit by $516.7 million in FY95 and $507.2 million in FY96.

Moody assumes that Hancock II will take effect immediately and that the excess revenue from both FY95 and FY96 will be returned to the taxpayers in the form of tax refunds in FY96. (As Moody concedes, however, “an argument could be made that [the FY96] refund would be made in Fiscal Year 1997.”)(31) Combining the FY95 and FY96 figures, Moody thus arrives at the sum of $1.024 billion, which he concludes must be refunded to the taxpayers and cut from the state budget in FY96.

Moody further estimates that the $1.024-billion budget cut would require a 32.36 percent cut in spending. Table 6 shows how that number was derived. Moody first assumes that, in response to Hancock II, the legislature will repeal two taxes that would have brought in $182 million in revenue in FY96.(32) Thus, that $182 million is subtracted from both the projected level of FY96 revenue and the amount of the spending cut. Moody then excludes $3,882.7 million in spending that he asserts is protected from spending cuts.(33) That reduces the pool of “unprotected spending,” from which $841.9 million must be cut, to $2,601.6 million. As Table 6 indicates, and as the Moody report asserts, accomplishing that feat would require spending to be cut by 32.36 percent.

Flaws of Moody Report

Moody’s analysis contains four major flaws. Table 7 indicates how those flaws inflate Moody’s estimate of the FY96 tax reduction necessary to comply with Hancock II.

1. Moody incorrectly assumes Hancock II applies to FY95. As the text of the Hancock II amendment clearly states, it becomes “effective the first full fiscal year after adoption.”(34) Since FY95 is already in progress, it cannot be the first full fiscal year after adoption. Thus, Hancock II would not take effect until FY96. Adjusting for that error lowers Moody’s tax reduction estimate by $516.7 million, the amount of his FY95 tax reduction estimate.

2. Moody’s “cut” is not what most people think of as a cut (i.e., it is not an actual reduction from the prior year’s level). Moody’s analysis employs the misleading “current services baseline” methodology made famous by the U.S. Congress. That is, when Moody claims that Hancock II will require spending to be “cut” by $1.024 billion, he does not really mean that after the cut the level of spending will be $1.024 billion less than the year before. Instead, he merely means that spending would be $1.024 billion lower than it would have been if politicians had continued to let the budget grow unchecked. Adjusting for that misleading accounting trick lowers Moody’s estimate of the necessary tax reduction by $311.2 million, the amount that the Missouri budget office and the Moody report assume revenue would grow from FY95 to FY96 without Hancock II (see Table 5).

3. Moody ignores the 1 percent refund threshold. Hancock II stipulates that a refund is required only if total state revenue exceeds the limit by more than 1 percent.(35) (That is true of Hancock I as well.) Moody’s estimates of the “required refund” ignore that 1 percent threshold. Moody incorrectly assumes that to avoid triggering a “required refund,” FY96 revenue must be reduced to the level of the revenue limit, when in reality it must merely fall below the refund threshold. Adjusting for that discrepancy by subtracting the amount of the 1 percent refund threshold lowers Moody’s estimate of the necessary tax reduction by $61.6 million.

4. Moody ignores one of his own assumptions. In calculating spending cut estimates, he makes the assumption that, in response to Hancock II, the legislature will repeal two taxes.(36) Those taxes were expected to bring in $182 million in revenue in FY96. Since by Moody’s own assumption, that $182 million will never be collected, his estimate of FY96 revenue, and thus of the tax reduction necessary to comply with Hancock II, should have been reduced by the same amount.(37) (Note that since adjustment 2 above essentially employs a baseline of FY95 revenue rather than projected FY96 revenue, subtracting $182 million from Table 7’s adjusted tax reduction estimate would involve an element of double counting, thus it is listed separately.)

In sum, as Table 7 indicates, the total effect of adjusting for the three main flaws in Moody’s analysis would lower his estimate of the tax reduction necessary to comply with Hancock II by $889.5 million. Rather than $1.024 billion, the necessary tax reduction would be only about one-eighth of that amount, or $134.4 million.

Furthermore, even ignoring the first three flaws, under Moody’s own assumptions, his $1.024-billion estimate of the tax reduction necessary to comply with Hancock II is incorrect. The correct figure is $841.9 million, nearly 20 percent lower than Moody claims.

Finally, Table 8 recalculates Moody’s FY96 percentage spending cut estimate (from Table 6), correcting for the flaws described above. Assuming that 58.2 percent of the budget is protected from spending cuts (as Moody assumed for FY96),(38) and employing an FY95 baseline of $6,355.1 in revenue (the Missouri budget office’s projection used in the Moody report), the amount of unprotected spending in FY95 would be $2,656.4 million. Using the corrected spending cut reduction figure of $134.4 million from Table 7, the percentage cut in unprotected spending necessary to comply with Hancock II would be 5.06 percent, less than one-sixth of the 32.36 percent cut Moody claims is required.

To summarize, while Moody asserts that Hancock II would necessitate revenue refunds and spending cuts of over $1 billion in FY96, in reality those cuts need be only $134.4 million. That is a far cry from a $1-billion cut. In addition, Moody’s claim that a 32.36 percent reduction would have to be made in all areas of unprotected spending, including schools, colleges, prisons, and highways, is overstated by a factor of six. That reduction need be only about 5 percent.

Furthermore, reductions are only necessary because, despite the Hancock amendment’s provisions, the Missouri legislature has refused to rein in the growth of the state budget. In fact, in FY95 alone, due in part to state senate bill 380–a $310-million tax hike for education, passed, but not approved by the voters, in 1993–state revenue will rise 9.4 percent, more than double the 4.1 percent rise in Missourians’ incomes.(39) Thus, over the past two years Missouri state revenue has gone up by over $700 million. That amounts to a 12.2 percent tax increase, nearly double the U.S. average for that period.(40)

Conclusion

The Moody report claims that the passage of Hancock II will require a tax refund of $1.024 billion, or $194 for every resident of Missouri. Although that may sound very enticing to Missouri’s taxpayers, those numbers are sheer fantasy. The huge tax refund and the corresponding deep spending cutbacks that Hancock II’s opponents are predicting if the measure is passed are vastly overstated. Voting for Hancock II will not put a check for $194 into the hands of each Missouri resident. Nor will it require the massive cuts in government services that its opponents are alleging. In reality, the actual reduction required by Hancock II would be, at most, 5 percent. That cut would be necessary only to compensate for the years of accumulated overspending outlined in this paper.

Despite the alarmist claims of its opponents, by linking state revenue growth to the growth of state personal income, all Hancock II would really do is require politicians to live under the same set of rules that Missouri’s taxpayers have been struggling under. Hancock II would merely restrain the ability of politicians to raise taxes and the budget faster than the growth of state taxpayers’ incomes. It would not require legislators to make drastic reductions in revenue and expenditures. In fact, it would not even prohibit them from raising taxes faster than personal income. If the state legislature wanted to pass a budget with a larger than allowed increase in revenue, Hancock II would not prevent them from taking that action. All Hancock II would require is that the legislature first obtain the permission of the people who must pay those higher taxes, the voters of Missouri. That seems a sensible response to 12 years of inflated state budgets and rapidly rising tax burdens in Missouri.

Table 1
Growth of Missouri State Spending Since Enactment of Hancock Amendment,
1982-1992
  Real Increase U.S. Rank Real per Capita Increase U.S. Rank Increase Per $1,000 Personal U.S. Rank
Missouri 63% 15 54% 8 22% 11
Plains States Avg.* 40%   31%   13%  
U.S. Average 55%   38%   12%  

*”Plains States” refers to the Census Bureau’s “West North Central” region which is made up of seven states: Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota.
Source: U.S. Census Bureau, State Government Finances, 1982 & 1992 editions.

Table 2
Growth of Missouri State Revenues* Since Enactment of Hancock Amendment, 1982-92
  Real Increase U.S. Rank Real per Capita Increase U.S. Rank Increase Per $1,000 Personal U.S. Rank
Missouri 65% 15 56% 3 24% 10
Plains States Avg.* 45%   31%   13%  
U.S. Average 51%   34%   10%  

*Total revenue minus intergovernmental revenue from the federal government.
**”Plains States” refers to the Census Bureau’s “West North Central” region which is made up of seven states: Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota.

Table 3
The Effect of the Court’s Redefinition of “Total State Revenue”
  FY1982 FY1983 FY1984 FY1985 FY1986 FY1987
Actual Amount of Total State Revenue (TSR) Under Differing Definitions
Missouri budget office’s definition* $2,397 $2,603 $2,841 $3,120 $3,326 $3,583
Hancock-I’s intended definition** $2,397 $2,710 $3,157 $3,461 $3,688 $3,968
Amount of revenue exempted from Hancock-I’s intended definition.*** $0 $107 $316 $341 $362 $385
Percentage of State Own-Source Revenue Exempted from the Revenue Limit Under Differing Definitions of TSR
Missouri budget office’s definition* 2.1% 6.5% 15.5% 14.5% 15.9% 22.1%
Hancock-I’s intended definition** 2.1% 2.7% 6.1% 5.2% 6.8% 13.7%
  FY1988 FY1989 FY1990 FY1991 FY1992 FY1993 1982-93 Increase
Actual Amount of Total State Revenue (TSR) Under Differing Definitions
Missouri budget office’s definition* $3,917 $4,175 $4,422 $4,630 $5,011 109.1% 109.1%
Hancock-I’s intended definition** $4,445 $4,726 $4,993 $5,201 $5,531 $5,620 134.4%
Amount of revenue exempted from Hancock-I’s intended definition.*** $528 $551 $571 $571 $586 $609 $4,926
Percentage of State Own-Source Revenue Exempted from the Revenue Limit Under Differing Definitions of TSR^
Missouri budget office’s definition* 18.7% 16.8% 17.3% 16.0% 17.1% 17.9%  
Hancock-I’s intended definition** 7.7% 5.9% 6.6% 5.6% 7.2% 7.9%  

*Refers to TSR as defined by the Missouri budget office (Office of Administration, Division of Budget and Planning).
**Hancock I’s intended definition differs from the budget office’s definition only in that it includes the amount of revenue from Proposition C and Proposition A.
***Equals the amount of revenue from Proposition C and Proposition A.
^”State Own-Source Revenue” excludes only federal funds. Note: Unless otherwise indicated, all figures are in millions of current dollars (i.e., not adjusted for inflation).
Source: Office of the State Auditor of Missouri, annual Hancock reports, FY1982-1993. Figures for 1989-93 taken from 1993 report, 1988 from 1992, 1987 from 1991, 1986 from1990,1985 from 1989, 1984 from 1988, 1983 from 1987, and 1982 from 1986 report.

Table 4
Contrary to the Intent of the Hancock Amendment, Total State Revenues Have Outpaced Personal Income Growth
  FY 1982 FY 1983 FY 1984 FY 1985 FY 1986 FY 1987 FY 1988
State Personal Income* $43,698 $47,697 $50,423 $54,817 $60,466 $66,605 $70,503
Annual Increas   9.2% 5.7% 8.7% 10.3% 10.2% 5.9%
Total State Revenue under intended definition of Hancock I (TSRH)** $2,397 $2,710 $3,157 $3,461 $3,688 $3,968 $4,445
Annual Increase   13.1% 16.5% 9.6% 6.5% 7.6% 12.0%
Revenue Limit*** $2,480 $2,706 $2,860 $3,110 $3,430 $3,776 $3,998
Annual Increase   9.1% 5.7% 8.7% 10.3% 10.1% 5.9%
Amount TSRH exceeded the limit   $4 $297 $351 $258 $192 $447
Percent TSRH exceeded the limit   0.2% 10.4% 11.3% 7.5% 5.1% 11.2%
TSRH as a share of personal income 5.49% 5.68% 6.26% 6.31% 6.10% 5.96% 6.30%
  FY 1989 FY 1990 FY 1991 FY 1992 FY 1993 FY 1994
State Personal Income* $74,825 $79,458 $84,864 $89,611 $92,733  
Annual Increas 6.1% 6.2% 6.8% 5.6% 3.5% 112.2%
Total State Revenue under intended definition of Hancock I (TSRH)** $4,726 $4,993 $5,201 $5,531 $5,620  
Annual Increase 6.3% 5.6% 4.2% 6.3% 1.6% 134.4%
Revenue Limit*** $4,242 $4,507 $4,814 $5,082 $5,258  
Annual Increase 6.1% 6.2% 6.8% 5.6% 3.5% 112.0%
Amount TSRH exceeded the limit $484 $486 $387 $449 $362 $3,716
Percent TSRH exceeded the limit 11.4% 10.8% 8.0% 8.8% 6.9%  
TSRH as a share of personal income 6.32% 6.28% 6.13% 6.17% 6.06%  

*As stipulated by Hancock I, the personal income figures used for FY 1982 are from calendar year 1980, for FY 1983: from CY 1981, etc. This is done because fiscal years end before calendar years.
**Hancock I’s intended definition differs from the budget office’s definition only in that it includes the amount of revenue from Proposition C and Proposition A.
***As defined by the Missouri budget office (Office of Administration, Division of Budget and Planning).
Note: Unless otherwise indicated, all figures are in millions of current dollars (i.e., not adjusted for inflation).
Source: Office of the State Auditor of Missouri, annual Hancock reports, FY1982-1993. Figures for 1989-93 taken from 1993 report, 1988 from 1992, 1987 from 1991, 1986 from 1990, 1985 from 1989, 1984 from 1988, 1983 from 1987, and 1982 from 1986 report.

Table 5
Moody Report’s Estimate of “Tax Reduction” Necessary to Comply with Hancock II
        Annual Growth
  FY 1994 FY 1995 FY 1996 1994-95 1995-96
State Personal Income* $98,963 $102,995 $108,668 4.1% 5.5%
Total State Revenue** $5,170.1 $5,657.2 $5,946.0 9.4% 5.1%
New revenues included by H-II**   $697.9 $720.3    
TSR plus new revenues**   $6,355.1 $6,666.3   +$311.2
Revenue Limit** $5,610.3 $5,838.4 $6,159.1 4.1% 5.5%
Amount TSR would exceed the limit**   $516.7 $507.2    
Tax reduction necessary to comply with Hancock II***     $1,023.9    

*As stipulated by Hancock I, the personal income figures used for FY 1994 are from calendar year 1992, for FY 1995: from CY 1993, etc. This is done because fiscal years end before calendar years. Figures are official U.S. Department of Commerce projections used by Missouri budget office and in the Moody Report.
**Figures are Missouri budget office projections of total state revenue subject to Hancock II used in the Moody Report.
***This figure is merely the sum of the excess revenues from FY 1995 and FY 1996. Moody assumes that this amount would have to be refunded to the taxpayer in FY 1996.
Note: This is an adaptation of Table 3 of the Moody Report. The Moody Report uses the term “required refund” for the amount which revenue is projected to exceed the limit. However, a refund would be required only if the legislature votes to collect that excess revenue, in violation of Hancock II. All figures are in millions of current dollars (i.e., not adjusted for inflation).
Source: Moody Report, Table 3, p. 7.

Table 6
Moody Report’s Estimate of “Spending Cuts” Necessary to Comply with Hancock II
  FY 1996
Total state revenue subject to Hancock II* $6,666.3
Spending cut necessary to comply with Hancock II** $1,023.9
Projected FY 1996 revenue from taxes Moody assumes would be repealed*** $182.0
Total state revenue subject to Hancock II (adjuste)^ $6,484.3
Spending cut necessary to comply with Hancock II (adjusted)^ $841.9
Moody’s estimate of “protected expenditures” ^^ $3,882.7
Amount of FY 1996 “unprotected spending”+ $2,601.6
Spending cut as a % of “unprotected spending”++ 32.36%

*Missouri budget office projection used in the Moody Report and in Table 5 of this report.
**Same as “tax reduction” figure from Table 5 of this report.
***In calculating his spending reduction estimates, Moody assumes that certain taxes will be repealed. The expected revenue from those taxes must be subtracted from both “total state revenue subject to Hancock II” and “spending cut necessary to comply with Hancock II.” According to the Missouri budget office projections used in Moody’s report, those taxes would have brought in $182 million in FY 1996. (Moody Report, pp. 14-15.)
^These figures exclude the $182 million in FY96 revenue that Moody assumes will not be collected.
^^This figure refers to spending on “a reasonable estimate of programs which are protected by federal law, the Missouri Constitution, federal courts, or Missouri state law or courts.” (Moody Report, p. ii, and Table 4, pp. 13-14.) +This figure is merely “total state revenue subject to Hancock II” minus “protected expenditures.”
++Note that this corresponds with Moody’s estimate of the required cut in non- exempted areas of spending. (Moody Report, p. 15.)
Note: All figures are in millions of current dollars (i.e., not adjusted for inflation).
Source: Moody Report, Tables 4 and 5, pp. 13-15.

Table 7
Adjustments to Moody’s Estimate of the Tax Reduction Necessary to Comply with Hancock II
  Amount of Adjustment FY 1996 FY 1996 Tax Reduction
Moody’s estimate of the tax reduction necessary to comply with Hancock II   -$1,023.9
Adjustments:    
1) Hancock II does not apply to FY95 $516.7  
2) Projected FY 1995-96 revenue growth* $311.2  
3) Amount of 1% refund threshhold in FY 1996** $61.6  
Total Adjustments $889.5  
Corrected estimate of the tax reduction necessary to comply with Hancock II   -$134.4
Moody’s estimate of the tax reduction necessary to comply with Hancock II   -$1,023.9
4) Uncollected revenue from Moody’s assumed tax repeals^ $182.0  
Moody’s estimate of the tax reduction necessary to comply with Hancock II, under his assumption of tax repeals   -$841.9

*Moody’s FY 1996 “required reduction” is a reduction from the projected level of FY 1996 revenue, rather than from the FY 1995 level. Since part of that “reduction” represents the elimination of projected 1995-96 growth, it does not measure the actual reduction from the prior year’s level of revenue. The number listed here represents the projected growth in “TSR plus new revenues” from FY 1995 to 1996, used in the Moody Report. Subtracting that growth from Moody’s reduction makes it an actual reduction. See Table 5 of this report.
**Hancock II (and Hancock I) allows revenue to exceed the limit by up to 1% without requiring a refund. The number listed is simply the amount of that 1% refund threshhold by which FY 1996 revenue could exceed the limit without requiring a refund.
^In calculating his spending reduction estimates, Moody assumes that certain taxes will be repealed, however his “required refund” estimate of $1,023.9 billion does not exclude that revenue. According to the Missouri budget office projections used in this report, those taxes would have brought in $182 million in FY 1996. Note that since adjustment #2 above essentially employs a FY 1995 baseline (rather that Moody’s baseline of expected FY96 revenue), subtracting this $182 million, together with that adjustment, from his estimated tax reduction would involve an element of double-counting, thus it is listed separately. (Moody Report, pp. 14-15.)
Note: All figures are in millions of current dollars (i.e., not for inflation).

Table 8 How Moody’s Flawed Tax Reduction Estimate Affected His Spending Cut Estimate
  FY1995
Moody’s estimate of the percentage cut in FY96 spending necessary to comply with Hancock II* 32.36%
Revised Estimate of Spending Cut  
TSR plus new revenues, FY 1995** $6,355.1
Total “protected expenditures,” FY 1995*** $3,698.7
Amount of FY 1995 “unprotected spending” ^ $2,656.4
Spending cut necessary to comply with Hancock II ^^ $134.4
Spending cut as a % of “unprotected spending” 5.06%
Published in: on January 18, 2008 at 8:11 am  Leave a Comment  

• Frustrated Taxpayers Speakout

To The Editor:

During the past several months, as one member of the Missouri House of Representatives Task Force on Property Taxes, I have frequently been asked just what it is that the Task Force is doing.

The short answer is that the task force was formed to look into property tax reform in the state of Missouri. This task force was given the assignment of studying and reviewing the assessment process as well as looking at legislative ideas from around the country on how to deal with rising property taxes. The creation of the task forces comes after continuing tax increases across the state, particularly in the St. Louis metro area. Members of the task force included state legislators as well as citizens from across the state.

The following represent my own thoughts. It seems to me that we now have a property tax system that is substantially out of control.

In 2005, total collections of property taxes in the state exceeded $5 billion – an amount equal to all collections of state income taxes – and during the past two years, property tax collections will have substantially exceeded state income taxes, I predict. Further, the overall collection of property taxes in the state has escalated at a rate two or three times higher than general inflation for a period of 10 years.

Our property tax system has become one of taxation by presumed increase in property values every two years, a method that has questionable economic substance, as paper gains on home values, etc., do not become real ones until the property is sold – and the vast majority of property owners do not sell their property on that kind of timetable.

Even the federal government, an organization not generally known for tax restraint, usually does not tax gains until something is sold, and those gains actually are realized. Further, a great many local taxing districts have managed to reap significant hidden tax increases by failure to roll back their tax rates commensurate with the presumed appraised value increases via reassessment.

The system was not intended that way as I understand it. The original Hancock Amendment required the various taxing districts to “roll back” their tax rates to a level which would yield them only the amount of revenue they had collected the previous year, plus an allowance for inflation. Over time, that restriction has been eroded in one manner or another, and full tax rate roll backs commensurate with assessment increases are now the exception rather than the rule – at least in urban taxing districts with which I am most familiar.

A great many taxing districts have managed to obtain tax rates that are higher than what they actually need – and so long as their current implemented rate is below that maximum, they essentially are free to set their current rate at whatever they please – without being hampered by the voters.

In a great many cases, the voters have no say in the matter.

The result has been unprecedented increases in property taxes over a period of many years.

While I believe that a great many assessment officials try hard to do their job properly, mass property assessments are hardly an exact science, and many variations in overall quality and accuracy seem to be prevalent across the state.

I am not sure it can ever be made workable – the assessment process is too imprecise, and the various laws and regulations regarding effective tax rates far too complex and which allow far too many loopholes – usually, to the taxpayers’ determent.

What is in essence an out-of-control taxing situation has not been hampered or slowed to date by effective legislative action at any level, state or local, it seems.

It also is apparent to me that property owners are outraged. I do not believe that word is too strong.

While senior citizen homeowners have been hit hard by this situation – the overall impact has adversely effected all who pay property taxes – regardless of age or economic status.

Taxpayers do not understand the current system, they find the maze of rules and regulation incomprehensible, they cannot predict with any accuracy from one year to the next what to set aside to pay such taxes – and they are fed up.

They want change, they want it now – and they want lower property taxes – that message has been clear.

I have seen far too many people come before our Task Force, of all ages, who have genuine fear that they will not be able to continue to live in their homes or continue to own other property – because they simply cannot afford the constantly increasing property tax burden they face. They also appear to be of the view that all officials and office holders involved with property taxes are indifferent to their plight.

My own observations have forced me to examine the very real probability that many taxing districts in general have insatiable appetites for constantly increasing tax revenue – without undue regard for the consequences.

Further, a bad situation, in my view, has been made much worse by far too great a use of TIF (tax increment financing) incentives by governmental entities at all levels within the state. To the extent that tax abatement incentives remove investment from the property tax rolls, or avoid adding such investments to the tax rolls – an increased tax burden is placed on all other classes of property owners who do pay property taxes.

We need to address methods of relief for all taxpayers at all ages and at all economic levels. The problem is too widespread and pervasive to limit consideration to one class of taxpayer or another.

All taxpayers require and deserve a better system than the one now in place – one which demands a reasonable level of good stewardship from those who consume tax revenue, and yet provides for needed government services, while discouraging waste or foolish spending

Finally, above all else, no property tax increase should ever occur by circumventing voter approval.

Creve Coeur

To The Editor:

I just read all the Letters to the Editor published in the Dec. 5 issue.

The frustration level over the outlandish tax increase imposed on the homeowners is growing each day. It is hoped that this frustration is carried over to the next election. However, ousting St. Louis County Executive Charles Dooley may not be the answer as all politicians seem to take up the same approach, similar to a kid in a candy store.

I also attended the Missouri Property Tax Task Force meeting and agree with many of the comments regarding this meeting as being a sham. There was no organization, not enough room to accommodate the attendees, and no microphone used by the speakers. The first portion of the meeting was a St. Louis County Department of Revenue representative telling us that they were just following the law. Apparently they only follow the portion of the law that works for them.

My real estate tax increased 28 percent on a house that decreased in value and my increase by far was not as high as some. I did see paperwork from an individual who owned a strip mall that had an increase in taxes from $10,000 to $25,000 and at the same time the County allows tax breaks to new businesses.

Is the tax liability for Charles Dooley and the Department of Revenue employees public information? If so, did their property tax increase match the general public increase?

Why do the employees have a guaranteed pay increase of 9 percent (many people who are being taxed unfairly have lost pay, benefits and jobs). Why is a staff reduction never considered?

Missouri Sen. Michael Gibbons is introducing legislation to roll back the 2007 tax increase around the state. This is a good thing; however, this legislation will not keep the people of the state or St. Louis County from paying the unfair assessment fee. I may have missed same, but I have not heard the mayor of Chesterfield address this issue.

Many retirees are convinced that St. Louis County does not want retirees residing in the County, or maybe even the state.

Chesterfield

To The Editor:

Thank you so much for responsibly reporting the activity surrounding what probably is the most unjustified theft of the people’s money since the governments started taxing. Please note that radio 550, 590, 1120, and yes even 97.1FM are all but ignoring the issue. The same is true for the local TV stations.

Although Channel 2 (FOX) recently commented on the tax bills, they grossly misinformed the public by stating that there was nothing they (the public) could do until 2009. This is absolutely wrong. Every taxpayer has the right to pay their tax under protest.

This is especially true in view of the lies that accompanied the original assessments that stated a higher assessment does not necessarily mean a higher tax.

Get real, assessor.

There is so much that stinks about the process that neither the County Supervisor or his appointed assessor should have a job at this point.

Why is the media ignoring the subject?

Silence on the subject also is apparent from St. Louis County Executive Charles Dooley (laughing to the bank), the mayor of Wildwood (same laughter), Ed Marshall, and Missouri Rep. Allen Icet. What’s wrong, gents? Knee weakness?

Ron Kardell gave you an accurate rundown of the process in your Nov. 14 newsmagazine.

I went to the conference. When I scheduled, I asked what information would be useful to discuss my position. I was tersely informed that “all I do is schedule, I don’t know what you should bring.”

Arriving early, I stopped by the “Property Owner Advocates” table and told them I was advised by an attorney to bring as many listings that I could for the year that showed how ridiculous my assessment was, plus-42.8 percent. All at the table agreed that the information was valid.

Next stop was the conference. A very pleasant young woman advised me that they could not accept listings. I understand that they cannot use them for assessing, but rarely are homes sold for more than the asking price. She advised that essentials include two comparables and if possible a commercial appraisal (60 mile round trip and 3 hours wasted).

Because my assessment was more than a 15 percent increase, I had a visit from a county appraiser. I was on my front porch with the phone company and saw him drive up and park in front of the entry porch. He said who he was and asked if there was anything I wanted him to see. I said the only thing he should see is how ridiculous the assessment was. He looked at his file, asked me about number of bathrooms, and said “this is not a mansion.” I said, “I know that, what do you mean?” Well, they have a code letter, no criterion, just arbitrarily assigned codes that significantly affect the assessment. As he left, he stated that he could guarantee that my new assessment would be in line with the rest of the neighborhood. He did not even walk around the house or take a measurement of any form.

A new assessment received some weeks later referenced the informal conference, but not the visit by the appraiser. Bottom line: no change.

I requested a hearing with the “Equalization Board” armed with my two comparables and a commercial appraisal that clearly showed a major reduction was in order. First stop was a screener who I informed of the appraiser’s visit and told him I want to see the Board as I was suffering County-induced fatigue. He disappeared for 30 minutes to the back of the room looking through books and consulting with others. He came back stating that there would be a reduction that somehow was overlooked. I said I want to see the board. He said OK, but first you have to sit with our assessor.

A very nice retired person who once worked for the County (hired again to do this job) listened to my story and came up with his own number for an assessment that he would recommend. I told him that he was very close to fair, but I still wanted to see the board.

I reviewed my history, my comparables, their hired appraiser’s recommendation, my appraisal, and much more. A gentleman fighting sleep commented on my very comprehensive presentation.

The new assessment received weeks later ignored all, but did recognize the drive-by assessor.

Finally, I read (St. Louis County Director of Revenue) Eugene K. Leung’s Letter to the Editor in the same issue. His last paragraph brought laughter tears to my eyes. He points out that the County takes an extra step with the informal conference and provides the Property Owner Advocates. Why is it that all politicians are eager to talk about what they provide, but fail to state the expenses associated with their actions? And it is our money they are wasting.

Keep up the good work.

Wildwood

To The Editor:

Tax season again, we can tell that by all the letters to the editor.

What I find both amusing and as a landowner, frustrating, is where these people are at election time year after year. Voters of this county put into office those people who promise them the most: a new water park in Ballwin, a new four-lane highway whether it is needed or not.

The problem with high taxes comes as a result of high spending.

The baby boomer liberals want to fund another attempt at public transportation. It was you, the voter, who proposed and elected the people who decided that you needed to pay for the Metro Link. If it were privately owned and operated, it would have been shut down. But you wanted it and how do I know that? You elected the people who did it.

It is right now that the voters should decide where the money comes from for all of these public good works.

The only time your complaint about high taxes counts for anything is at the voting booth. If you elect fiscal conservatives, you will not get your water park, but hopefully your taxes will not go up as fast.

One more time, complaining about high taxes should be done in April and November at the polls. Elect the person who promises not the new teacher’s assistant, but holding the line on new taxes of any kind.

Ballwin

To The Editor:

West Newsmagazine has done an excellent job covering the frustration of those property owners who have had extraordinary property tax increases.

I am included in that group; my taxes have increased 35-plus percent in the last two assessments (three tax years). However, the process for change is not tilting the board of equalization, rather the assessor needs to be made accountable to the taxpayers, not the county supervisor, and the voters can and should consider recalling the government rather than try “jaw”-boning them to act responsibly.

Why don’t those who want change meet to prepare a ballot issue for the assessor to be elected and recall St. Louis County Executive Charles Dooley and the St. Louis County Council who are perceived to be the problem?

Act rather than complain.

Published in: on January 17, 2008 at 8:20 pm  Leave a Comment