History of Prop 13 including a look at Init 601

Page 1
Proposition 13 and State
Budget Limitations
Past Successes and Future Options
by Michael J. New
Michael J. New is a postdoctoral fellow at the Harvard-MIT Data Center and an adjunct scholar at the
Cato Institute.
No. 83
June 2003 marks the 25th anniversary of the
passage of Proposition 13, a landmark tax limi-
tation measure approved by California voters in
1978. Proposition 13 triggered one of the
nation’s largest state and local tax reductions by
immediately cutting California property taxes
by $5 billion. But Proposition 13’s impact went
far beyond tax relief in California. It launched a
wave of tax limitation efforts in other states and
created momentum for the large federal tax cuts
passed in 1981.
Although Proposition 13 limited property
taxes, it failed to impose long-term discipline on
state and local budgets in California. Indeed,
total state and local revenues (including federal
aid) in California have risen from 19.4 percent of
personal income the year after Proposition 13
passed to 24.6 percent today. Rapidly expanding
spending since the mid-1990s has put the state
into a fiscal crisis with record budget gaps cur-
rently being reported.
Proposition 13’s focus on property taxes was
too narrow to limit overall state and local govern-
ment budgets in California. However, a number of
states in the past decade have enacted broader tax
and expenditure limitations (TELs) that attempt
to control overall government growth. This paper
discusses how well-designed TELs can restrain
spending and provide tax relief. TELs combined
with other mechanisms to terminate unneeded
government programs should be pursued in all
state and local jurisdictions to close current budget
gaps and counteract the tendency of governments
to collect ever-larger shares of Americans’ income.
June 19, 2003
Page 2
Introduction
California’s landmark Proposition 13 was
passed in a June 1978 referendum with 65
percent popular support. It slashed
California property taxes from $11 billion to
$6 billion between 1978 and 1979 and insti-
tuted tax limitation mechanisms that are still
in force today.
1
Proposition 13’s impact went
far beyond tax relief in California. It
launched a wave of tax limitation efforts in
other states and generated momentum for
large federal tax cuts in 1981.
This study first discusses the enactment
of Proposition 13 and examines California’s
tax and spending trends during the past 25
years. The study then focuses on lessons
learned from Proposition 13 and looks at
budget mechanisms in other states to discern
which are the most effective at controlling
spending. A statistical analysis concludes
that well-designed tax and expenditure limi-
tations (TELs) can restrain government
growth. Finally, the successful budget limita-
tions in place in Colorado and Washington
State are discussed.
2
The Enactment of
Proposition 13
Throughout the 1960s and 1970s high
and rising property taxes were a persistent
problem in California. Total property taxes
in California jumped from $6.7 billion in
1972 to $11.0 billion in 1978.
3
A number of
groups were formed to find a solution to the
problem, including the United Organization
of Taxpayers created by Howard Jarvis. The
UOT focused on placing initiatives on the
state ballot in an attempt to reduce property
taxes. In 1968, 1971, and 1976 the organiza-
tion’s efforts stalled when it failed to obtain a
sufficient number of signatures.
4
However,
Jarvis teamed up with Paul Gann of People’s
Advocate in 1977, and their campaign easily
surpassed the 500,000 signatures necessary
to get Proposition 13 on the ballot.
5
Proposition 13 limited property tax rates to 1
percent of assessed value and limited proper-
ty assessment increases to 2 percent annually.
It also imposed a supermajority voting
requirement on the state legislature for tax
increases.
6
Though it qualified for the ballot,
Proposition 13 still faced hurdles. Indeed,
many voters considered Proposition 13 too
radical, and for much of the spring leading
up to the June vote, polls showed that the
electorate was evenly split.
7
But Jarvis and
Gann received good news in May when the
assessor’s office in Los Angeles County pro-
posed huge increases in property assess-
ments for the next fiscal year. The increases
were bad news for taxpayers, but they made
headlines and shocked homeowners, thus
providing fuel to the tax limitation move-
ment.
8
Indeed, the opposition never recov-
ered from that setback, and Proposition 13
passed with 65 percent of the vote—nearly a
two-to-one approval margin.
9
The passage of Proposition 13 had a num-
ber of favorable consequences in California
and across the country. First, it triggered an
immediate $5 billion reduction in property
taxes in California (from $11 billion in 1978
to $6 billion in 1979).
10
That relief was much
needed because property taxes had been soar-
ing and newspapers were filled with stories of
elderly residents on fixed incomes and other
families that simply could not afford the ris-
ing burden.
11
Second, tax cuts were needed to help
boost California’s economy. California’s
state and local tax burden was among the
highest in the country before Proposition
13.
12
And like the rest of the country,
California was mired in stagflation during
the late 1970s. Proposition 13 was a shot in
the arm. In the years immediately following
its passage, California’s economic growth
exceeded the national average, and the state’s
unemployment rate fell.
13
That belied some
economists’ dire predictions. In early 1978
economic forecasters from the University of
California, Los Angeles, had argued that
Proposition 13 would increase unemploy-
2
Proposition 13
slashed
California prop-
erty taxes from
$11 billion to $6
billion between
1978 and 1979.
Page 3
ment and hurt the state’s economy.
14
Instead,
the tax cuts were followed by robust econom-
ic growth.
Other dire predictions also failed to come
true. Proposition 13 was strongly opposed by
special interests, including unions, some big
corporations, and various good-government
groups.
15
Those opponents argued that
Proposition 13 would cripple vital govern-
ment services.
16
That did not occur, but after
the initiative passed, the legislature did allo-
cate part of the state surplus to local govern-
ments.
17
Although some needed cutbacks in
government spending were made, the pre-
dicted crisis did not materialize.
18
Finally, Proposition 13 generated nation-
wide momentum for tax cuts and tax limita-
tions. Property taxes were an obvious focus
for tax limitation efforts. Property taxes are
highly visible to homeowners, and polls have
consistently found that they are among the
most unpopular taxes. A number of subse-
quent property tax limitation efforts were
successful; Massachusetts’s Proposition 2½
is the most prominent.
19
Also, numerous
states enacted a variety of tax and spending
limitations in 1978 and 1979.
20
The Legal Aftermath of
Proposition 13
Since its passage, Proposition 13 has come
under numerous legal attacks, but it has
remained largely intact. The attacks began
even before Proposition 13 was enacted. In
April 1978 government lawyers gathered in
San Jose to map out a strategy for overturn-
ing Proposition 13 in court if it passed.
21
Theirs was a three-pronged plan. First, they
argued that Proposition 13 violated the sin-
gle subject rule of the California
Constitution. That rule requires that all bal-
lot initiatives deal with only one subject.
Second, they argued that different assess-
ments of similar properties violated the equal
protection clauses of the California and U.S.
Constitutions. Third, they argued that
Proposition 13 was unconstitutional because
the revenue reductions would force local gov-
ernments to breach contracts.
22
Shortly after Proposition 13 was passed, a
lawsuit was filed. To gain maximum sympa-
thy for the lawsuit, the lawyers decided to use
school districts to front for Proposition 13’s
opponents. However, on September 22, 1978,
the state supreme court rejected all three
arguments and upheld by a six-to-one vote
the constitutionality of Proposition 13.
23
Nonetheless, legal challenges continued
through the 1980s and 1990s. One series of
attacks centered around the ability of local
governments to levy nonproperty taxes.
Section 4 of Proposition 13 states, “Cities,
counties, and special districts, by a two-thirds
vote of the qualified electors of such district,
may impose special taxes.” Jarvis intended
that provision to cover all the taxes that local
governments were authorized to impose.
24
However, in San Francisco v. Farrell, the
California Supreme Court ruled that “special
taxes” meant “taxes which are levied for a spe-
cific purpose rather than a levy placed in the
general fund to be utilized for general gov-
ernment purposes.” That decision allowed
localities to impose or increase any locally
authorized general tax without voter
approval.
25
California voters reversed that court deci-
sion in 1986 when they approved
Proposition 62. That initiative required that
general taxes imposed by local governments
be approved by a majority popular vote. In
1991 a California appellate court ruled that
Proposition 62 was unconstitutional.
However, that decision was reversed by the
California Supreme Court in 1995.
26
In 1996
California voters approved Proposition 218,
a constitutional rule backed by the UOT, that
required that all local general taxes secure
majority approval and that special taxes
secure two-thirds voter approval.
27
Another series of legal attacks on
Proposition 13 centered on the equal protec-
tion clause. Proposition 13 led to disparities
in property assessments and thus property
tax burdens. Annual assessment increases
were limited for particular homeowners, but
3
Proposition 13
generated nation-
wide momentum
for tax cuts and
tax limitations.
Page 4
when property was sold, it was reassessed at
market value. As a result, owners of similar
homes might face different tax burdens
depending on when they purchased their
property. The test case that reached the U.S.
Supreme Court involved Los Angeles County
homeowner
Stephanie
Nordlinger.
Nordlinger purchased a home in November
1988 for $170,000. She argued that the state
was violating the equal protection clause
because her property taxes were five times
higher than the taxes paid by owners of com-
parable homes.
28
In an eight-to-one decision, the Court on
June 18, 1992, upheld the constitutionality
of Proposition 13. Justice Harry Blackmun
wrote in the decision that “the appropriate
standard of review is whether the difference
in treatment between newer and older own-
ers rationally furthers a legitimate state inter-
est.” Blackmun found two compelling state
interests: neighborhood preservation and
continuity, and the protection of existing
property owners who purchase property with
certain tax expectations.
29
That case marked
the last major legal attempt to overturn
Proposition 13.
California Taxation and
Spending since Proposition 13
Proposition 13 and the broader tax revolt
in California have had a mixed long-term
impact. Proposition 13 was both an immedi-
ate tax cut and a longer-term tax limitation.
As a tax cut, it successfully reduced sky-high
homeowner tax burdens. However, it has
enjoyed less success at controlling overall tax
burdens in the state. In the years following
the passage of Proposition 13, the state gov-
ernment raised the general sales tax rate and
tax rates on beer, wine, gasoline, cigarettes,
and other items.
30
Figure 1 shows Census data on California
state and local revenues from property taxes
compared to the sum of revenue from gener-
al sales taxes and income taxes (individual
and corporate).
31
Property taxes dropped
substantially in the late 1970s and have not
exceeded 3 percent of state personal income
since then. Sales and income taxes rose
sharply in the 1970s and again during the
1990s. California personal income grew at an
average annual rate of 7.3 percent between
1979 and 2000, while property taxes grew at
4
Proposition 13
has enjoyed less
success at control-
ling overall tax
burdens in the
state.
2%
3%
4%
5%
6%
7%
1972
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Sales and Income Tax Revenues
Property Tax Revenues
Figure 1
California Property Taxes vs. Sales and Income Taxes
(as percentage of state personal income)
Source: Author’s calculations based on U.S. Bureau of the Census data. Data for 1973–76 not available. Includes
both the state government and local governments.
Page 5
7.2 percent. But income taxes grew at 9.3 per-
cent and total state and local government
revenue rose at an average annual rate of 8.5
percent during the period.
Figure 2 shows total state and local govern-
ment revenues in California since 1977 in con-
stant 2000 dollars.
32
(This is a broad Census
measure of revenues; it includes federal aid and
various nontax receipts). Figure 2 illustrates
that after Proposition 13 cut revenues in 1979 it
took a few years for the government to regain
ground. However, during the economic booms
of the late 1980s and the late 1990s, revenue
soared. In sum, California taxpayers were win-
ners in the late 1970s but have lost ground to
the government since then.
Supporters of tax limitation in California
have long recognized that Proposition 13
alone was not enough to control state and
local government growth. In 1979 Gann
gathered enough signatures to place Propo-
sition 4 on the ballot.
33
Proposition 4, which
became known as the Gann Amendment,
limited increases in state and local appropri-
ations from tax revenue to population
growth plus inflation (now limited to per-
sonal income growth).
34
Interestingly, Jarvis was ambivalent about
Proposition 4. He focused mainly on reducing
taxes, not spending, and did not endorse
Proposition 4 until the end of the campaign.
35
Nonetheless, Proposition 4 passed by nearly a
three-to-one margin.
36
Initially, Proposition 4
was modestly successful at reducing state
spending growth. Indeed, California taxpayers
received tax rebates from the state government
in 1987 when revenue exceeded the imposed
budget limit.
37
However, the long-term effectiveness of
Proposition 4 was reduced by a number of
factors. Proposition 4 established a limit on
appropriations from tax revenue, not on
overall spending.
38
As a result, California
began to rely more heavily on revenue from
fees and other nontax sources. More impor-
tant, the budget limit was undermined in
1990 when California voters passed
Proposition 111, which mandated increases
in California’s education spending and
watered down the Proposition 4 budget limit
to pay for them.
39
California’s rank among the 50 states in
per capita state spending fell from 7th high-
est in 1980 to 16th highest in 1991, partly as
5
California tax-
payers were win-
ners in the late
1970s but have
lost ground to
the government
since then.
$-
$50
$100
$150
$200
$250
$300
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Figure 2
California Total State and Local Revenues
(billion constant 2000 dollars)
Source: Author’s calculations based on U.S. Bureau of the Census data.
Page 6
a result of the Proposition 4 limit.
40
Then as
the limit was weakened, California’s rank
rose to 12th by 2000. A similar pattern
occurred for per capita state taxes and overall
state revenues. In the early 1990s the passage
of Proposition 111 did not immediately
cause a state spending increase because
California had to cut spending to balance its
budget during the recession.
41
But spending
soared in the 1990s, as illustrated in Figure 3,
which shows state general fund spending in
2003 constant dollars. With regard to the
current state budget crunch, Figure 3 shows
that real spending dipped slightly in 2002
and 2003 but is still far higher than in 2000.
If spending had been held to the original
Proposition 4 limit since 1994, it would have
been $25 billion lower in 2003, and the state
could have averted its current fiscal crisis.
42
Finding Tax and
Expenditure Limitations
That Work
California’s experience shows that broad-
er rather than narrower limitations on taxes
and spending are needed to restrain govern-
ment growth. TELs establish broad caps on
annual growth in government budgets. New
Jersey passed the first state TEL in 1976,
43
and 26 states currently have TELs on the
books.
44
A number of academic studies have
concluded that TELs are ineffective.
45
However, some recent evidence shows that
the particular design of a TEL is important to
its effectiveness. If properly designed, a TEL
can be a useful mechanism for enforcing
state fiscal discipline.
Two provisions, in particular, can dramat-
ically enhance the effectiveness of a TEL: a
provision that limits the growth of govern-
ment spending to a baseline of inflation plus
population growth and a mandate that the
government immediately refund surplus rev-
enues above that limit to taxpayers.
Limiting Expenditure Growth to
Inflation Plus Population Growth
Most of the state TELs passed since 1976
limit growth in spending and revenues to state
personal income growth.
46
However, Colorado
and Washington State have more stringent
measures that limit spending growth to infla-
6
Real spending
dipped slightly in
2002 and 2003 but
is still far higher
than in 2000.
$-
$10
$20
$30
$40
$50
$60
$70
$80
$90
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
Figure 3
California General Fund Spending
(billion constant 2003 dollars)
Source: Author’s calculation based on data from the California Legislative Analyst’s Office, May 2003. Data for
2003 are preliminary.
Page 7
tion plus population growth.
47
That limit is
preferable to personal income growth because
income tends to grow faster over time than
population plus inflation. Holding spending
increases to personal income growth, as most
TELs do, does not provide an effective check on
government growth.
Refunding Surplus Revenues to
Taxpayers
A second effective TEL provision is a require-
ment for the immediate refund of surplus rev-
enues to taxpayers. Four states (Colorado,
Michigan, Missouri, and Oregon) have TELs
that require the return of excess revenues that
exceed limits.
48
Rebate provisions strengthen
TELs by making it more difficult for govern-
ments to spend the excess. In addition, they give
citizens and watchdog groups an incentive to
see that the limits are enforced.
An examination of the recent budgetary
histories of Colorado, Michigan, Missouri,
and Oregon illustrates another positive
incentive created by TELs with rebate mecha-
nisms. When state legislators see that rev-
enues will exceed limits, they often proactive-
ly cut taxes to reduce revenue inflows to the
government. That is a politically appealing
way for legislators to return excess revenues
to taxpayers. It can also provide taxpayers
more economically beneficial permanent
cuts, not just temporary rebates.
It is simpler for legislators to proactively
cut taxes than to deal with rebate mecha-
nisms. While property and income taxes can
be rebated, it is difficult to rebate sales taxes.
Also, if refunds are proportional to overall
taxes paid, they appear to favor the rich, which
concerns some legislators. As a result, legisla-
tors have an incentive to cut taxes before auto-
matic refunds take effect. Indeed, Colorado,
Michigan, and Missouri (three of the four
states that have TELs with mandated refunds)
have enacted tax cuts when revenues have
exceeded the mandated limits.
49
Regression Analysis of TEL Provisions
A regression analysis of state budget data
between 1972 and 1996 sheds light on which
TEL provisions are the most effective.
50
The
results demonstrate that a spending limit
equal to population growth plus inflation is
an effective structure for a TEL. Under such a
limit, the regression equation predicts that
state and local spending per capita will be
reduced by $115 per year.
51
Refund provisions are also effective. If a
TEL does not include a population plus
inflation growth limit but does include a
refund provision, the regression predicts that
per capita spending will be reduced by $40
per year.
52
The analysis also suggests that
TELs with neither of those two provisions
will not be effective at controlling spending.
53
In sum, statistical analysis provides evidence
that TELs can be an effective tool for limiting
state government growth, but only if they are
well designed.
A Closer Look at
Washington and Colorado
The TELs passed in Washington State and
Colorado have been particularly effective.
TELs in both states limit annual spending
growth to the sum of population growth
plus inflation. Washington’s limit, passed in
1993, took effect in fiscal 1996. Colorado’s
limit, passed in 1992, took effect in fiscal
1994.
54
This section presents case studies of
those two states.
Washington’s Initiative 601
In response to a tax hike passed by the
state legislature in early 1993, voters in
Washington State enacted a TEL called
Initiative 601.
55
Initiative 601 had two fea-
tures that made it particularly effective at
limiting spending. First, it limited annual
state spending growth to population growth
plus inflation. Second, it prevented the legis-
lature from circumventing the limit by
devolving functions of government to the
localities.
56
After Initiative 601 was enacted, the state
legislature passed a supplemental budget to
ensure that it was in compliance with the
7
TELs can be an
effective tool for
limiting state
government
growth, but only
if they are well
designed.
Page 8
limit. The legislature instituted some target-
ed budget cuts in administration, social ser-
vices, prisons, and elsewhere to save more
than $120 million in the new biennium.
Public colleges were directed to trim expens-
es by $39 million.
57
Initiative 601 was effective at limiting
state spending growth. In the four years
before the initiative took effect, spending
increased by an average of 17.3 percent annu-
ally. In the four years after the initiative took
effect, spending increased by 8.6 percent
annually.
58
In the late 1990s the legislature
took steps to reduce taxes when it appeared
that the government was collecting excessive
revenue. The legislature enacted tax cuts of
$38.5 million and $19.7 million for fiscal
1998 and 1999, respectively.
59
Washington voters desired even greater
tax relief. In 1998 voters passed Initiative 695,
which reduced the motor vehicle excise tax by
$256 million. In 1999 voters repealed the
motor vehicle excise tax, reducing the tax
burden by an additional $1.1 billion.
60
A taste
of tax reduction under Initiative 601 appar-
ently led to demands for further tax cuts.
Initiative 601’s main shortcoming is that
it is statutory, not constitutional, which
makes its limitations subject to legislative
override. In the spring of 2000, the state leg-
islature obtained the necessary supermajori-
ty to suspend the limit, and the governor
signed that year’s budget into law.
61
As it
turned out, lifting the limit in 2000 was very
poorly timed because it led to spending
increases that were unsustainable in the eco-
nomic slowdown that began in 2001.
Colorado’s Taxpayer Bill of Rights
The most successful TEL is Colorado’s
Taxpayer Bill of Rights. During the late
1980s and early 1990s, anti-tax activist
Douglas Bruce led efforts to enact ballot
measures to reduce taxes in the state. After
unsuccessful attempts in 1988 and 1990,
62
Colorado passed TABOR in 1992.
63
Like Washington’s Initiative 601,
Colorado’s TABOR limits spending growth
to population growth plus inflation and
mandates immediate refunds of surplus rev-
enues above that limit.
64
Unlike the
Washington law, TABOR is a constitutional
provision and thus the legislature cannot
override it.
65
Shortly after TABOR was enacted,
Colorado revenues began to exceed the limit
and taxpayers were entitled to tax rebates.
From 1997 to 2001 Colorado reduced taxes
more than any other state, issuing annual tax
rebates of $139 million in 1997, $563 million
in 1998, $679 million in 1999, $941 million
in 2000, and $927 million in 2001, for a total
of $3.2 billion.
66
State data show that a tax-
payer earning $30,000 would have received
total rebates of about $900 over this period.
67
Although TABOR has provided modest
rebates, political opposition has demonized
it as being far too radical. When TABOR was
initially being debated, the New York Times
called it the “most radical ballot initiative in
the nation.”
68
Gov. Roy Romer said that
defeating TABOR was the “moral equivalent
of defeating the Nazis at the Battle of the
Bulge.”
69
He called TABOR champion Bruce
“a terrorist who would lob a hand grenade
into a schoolyard full of children.”
70
Romer
also predicted that TABOR would damage
the state economy.
71
None of those dire predictions came true.
In fact, Colorado’s economy has been excep-
tionally strong. Between 1995 and 2000
Colorado had the fastest growth in gross
state product of any state and the second
fastest growth in personal income.
72
In addi-
tion to providing tax relief and spurring eco-
nomic growth, TABOR allows Colorado resi-
dents to appreciate the tradeoffs of expand-
ing or contracting the state government at
the margin. Every year from 1993 to 1999
there was a proposal on the ballot to either
raise taxes or increase spending in excess of
the limit. Knowing that those initiatives
would reduce the size of their tax rebate, vot-
ers soundly defeated each measure.
73
In 2001
an initiative to increase school spending did
pass.
74
However, TABOR had been so effec-
tive at keeping spending in check that the
state government had enough surplus rev-
8
The most success-
ful TEL is
Colorado’s
Taxpayer Bill of
Rights.
Page 9
enue to increase school spending in 2001 and
still issue tax rebates that year.
75
Conclusion
California’s Proposition 13 remains a land-
mark victory for taxpayers seeking to impose
limits on government expansion. It resulted in
substantial and ongoing property tax relief in
the state and generated nationwide momen-
tum for tax reform. However, Proposition 13
did not impose overall discipline on state and
local spending in California. Indeed,
California’s rapid spending increases during
the 1990s caused the large budget crisis that
the state currently faces.
The good news is that Proposition 13
spawned policy innovations in other states,
and a number of states provide models of
effective TELs. A well-designed TEL, such as
Colorado’s TABOR, can restrain spending
growth and provide tax relief.
In addition to implementing budget
growth limitations, state policymakers
should always look for unneeded programs
to terminate or privatize. Some states, such
as Texas, have “sunset” commissions that
examine state programs in detail on a rotat-
ing schedule to look for waste and duplica-
tion.
76
Widespread sunsetting would reduce
overspending by reforming programs on an
ongoing basis. While TELs focus on aggre-
gate state budget figures, sunset mechanisms
are a great complement to cut unneeded pro-
grams and provide the lean and efficient
state governments that America’s taxpayers
deserve.
Notes
1. Robert Kuttner, Revolt of the Haves (New York:
Simon and Schuster, 1980), p. 80.
2. Michael J. New, “Limiting Government through
Direct Democracy: The Case of State Tax and
Expenditure Limitations,” Cato Institute Policy
Analysis no. 420, December 13, 2001, pp. 10–13.
3. U.S. Bureau of the Census, State and Local
Governmental Finances (Washington: Government
Printing Office, various annual issues). See also
U.S. Bureau of the Census, state and local govern-
ment finances website, www.census.gov/govs/
www/estimate.html. These are fiscal year data.
4. Daniel Smith, Tax Crusaders and the Politics of Direct
Democracy (New York: Routledge, 1998), pp. 69–70.
5. Ibid., pp. 70–72.
6. Kuttner, p. 65.
7. Ibid., pp. 73–74.
8. Ibid., pp. 74–75.
9. Ibid., p. 80.
10. Ibid.
11. Ibid., p. 75.
12. U.S. Bureau of the Census, State and Local
Governmental Finances. See also U.S. Bureau of the
Census, state and local government finances web-
site. Calculations by the author.
13. Alvin Rabushka and Pauline Ryan, The Tax
Revolt (Stanford, Calif.: Hoover Institution Press,
1982), pp. 84, 86.
14. Ibid., p. 26.
15. Kuttner, pp. 69–70.
16. Ibid., p. 72.
17. Ibid., pp. 81–83.
18. Rabushka and Ryan, pp. 129–30. See also
Kuttner, pp. 84–90.
19. Ibid.
20. Rabushka and Ryan, pp. 187–93.
21. David Doerr, California’s Tax Machine: A History of
Taxing and Spending in the Golden State (Sacramento:
California Taxpayers’ Association, 2000), p. 158.
22. Ibid.
23. Ibid., p. 159.
24. Ibid., p. 185.
25. Ibid.
26. Ibid., p. 205.
27. Ibid., pp. 304–5.
9
Page 10
28. Ibid., p. 259.
29. Ibid., p. 260.
30. The Book of the States 1978–1979 (Lexington, Ky.:
Council of State Governments, 2000), pp. 309–13.
See also David Hoffman, “State Tax Collections
and Rates,” Tax Foundation, February 2002.
31. U.S. Bureau of the Census, State and Local
Governmental Finances. See also U.S. Bureau of the
Census, state and local government finances website.
32. Ibid. See also U.S. Bureau of the Census, State
and Local Governmental Finances. Figure 2 uses the
broadest Census measure of revenues, which
includes federal aid, fees, charges, and insurance
trust revenue.
33. Kuttner, p. 304.
34. Mandy Rafool, “State Tax and Expenditure
Limitations,” National Conference of State
Legislatures, Legislative Finance Paper no. 104,
1996, p. 14.
35. Kuttner, p. 305.
36. Ibid., p. 306.
37. Doerr, pp. 207–9.
38. Rafool, “State Tax and Expenditure Limitations,”
p. 20.
39. Brad Williams and David Vasche, “The State
Appropriations Limit,” California Legislative
Analyst’s Office, April 13, 2000, www.lao.ca.gov/
2000_reports/041300_gann/041300_gann.html.
40. U.S. Bureau of the Census, State and Local
Governmental Finances. See also U.S. Bureau of the
Census, state and local government finances website.
41. Doerr, p. 246.
42. General fund expenditure data from Robert
Ingenito, California Legislative Analyst’s Office,
www.lao.ca.gov. Converted by author to 2003
constant dollars based on the consumer price
index.
43. Rabushka and Ryan, p. 186.
44. Rafool, “State Tax and Expenditure Limitations,”
p. 6.
45. See Marcia Howard, “State Tax and Expenditure
Limitations: There Is No Story,” Public Budgeting and
Finance 9, no. 2 (1989): 83–90; Dale Bails, “The
Effectiveness of Tax and Expenditure Limits: A Re-
evaluation,” American Journal of Economics and
Sociology49, no. 2 (1990): 223; and Daphne Kenyon
and Karen Benker, “Fiscal Discipline: Lessons from
the State Experience,” National Tax Journal 37, no. 3
(1984): 433–46.
46. Rafool, “State Tax and Expenditure Limitations,”
pp. 27–33.
47. Ibid., pp. 13, 18.
48. Ibid., pp. 27–33.
49. See ibid., p. 17; David Webber, “The Missouri
Experience with State Revenue Limits—The
Hancock Amendment,” Paper presented at Policy
Collaborative on Tax and Spending Limits in the
States, University of Colorado, July 2001, p. 13;
and Franklin James, “Tax and Spending Limits in
Colorado,” Paper presented at Policy Collabora-
tive on Tax and Spending Limits in the States,
University of Colorado, July 2001, p. 10.
50. See New, pp. 9–10, for the full statistical
results of this analysis.
51. Ibid., pp. 10–11.
52. Ibid.
53. Ibid.
54. Rafool, “State Tax and Expenditure Limitations,”
p. 18.
55. Ibid., p. 17.
56. Ibid., p. 18.
57. Ibid.
58. U.S. Bureau of the Census, State and Local
Governmental Finances. See also U.S. Bureau of the
Census, state and local government finances web-
site. Calculations by the author.
59. See Judy Zeilo, State Tax Actions 1997 (Denver:
National Conference of State Legislatures, 1998),
p. 15; and Judy Zeilo, Scott Mackey, and Mandy
Rafool, State Tax Actions 1998 (Denver: National
Conference of State Legislatures, 1999), p. 11.
60. Mandy Rafool, State Tax Actions 1999 (Denver:
National Conference of State Legislatures, 2000),
p. 39.
61. Bob Williams, “House Budget Shreds
Spending Limit (I-601),” Evergreen Freedom
Foundation Policy Highlighter, 2000.
62. Smith, p. 136.
63. Ibid.
10
Page 11
64. Rafool, “State Tax and Expenditure Limitations,”
pp. 13–14.
65. Ibid., p. 13.
66. Colorado Department of Revenue websites:
www.revenue.state.co.us/refund2001.html,
www.revenue.state.co.us/refund2000.html,
www.revenue.state.co.us/refund99.html,
www.revenue.state.co.us/refund98.html, and
www.revenue.state.co.us/refund97.html.
Calculations by the author.
67. Ibid. Calculations by the author.
68. Dirk Johnson, “Taxpayer Revolt in Colorado
Raises Alarm about Lost Services,” New York
Times,November 15, 1992, p. 18.
69. Quoted in Stephen Moore and Dean Stansel, “The
Great Tax Revolt of 1994,” Reason, October 1994, p. 20.
70. Quoted in ibid.
71. Ibid.
72. Data on gross state product and personal
income from the U.S. Bureau of Economic Analysis
website, www.bea.doc.gov. Calculations by the
author.
73. “TABOR Legislative Handbook,” Independence
Institute, 1999, http://independenceinstitute.org/
Publications/IP/Taxfiscal/TABORhandbook.htm.
74. James, p. 10.
75. Colorado Department of Revenue website,
www.revenue.state.co.us/refund2001.html.
76. Chris Edwards, “Sunsetting to Reform and
Abolish Federal