tax-reformBy John Hendrickson

Across the nation, Governors and state Legislators are confronted with the task of implementing sound economic policies that will both attract businesses and create jobs. The difficulty of this responsibility has increased in the aftermath of the weak recovery from the “Great Recession,” as unemployment remains high, and states as well as the federal government face tremendous fiscal challenges. Many states across the nation have led the way in restoring pro-growth economic policies that consist of tax reform, reduced spending, and reforming state government. These are policies that are needed in order for economic growth to take place. The policy of both low spending and taxation is a blueprint for economic success.

In examining specific pro-growth economic policies, policymakers in Iowa should consider a Taxpayer’s Bill of Rights measure or TABOR. Colorado was the first state to implement a TABOR provision, which was adopted by voters in 1992 in response to high levels of spending and taxation. The purpose of TABOR was to bring spending and taxes under control by requiring voter approval. Under TABOR, state spending was slowed to the rate of population growth and inflation, and it brought more accountability to government. Although Colorado voters have modified their TABOR, the measure has provided the most aggressive tax and spending limitation measure in the nation.

The state Legislature in Iowa is currently faced with the challenge of implementing both tax and spending reform. A TABOR measure would be a pro-growth policy provision if implemented. The TABOR provision in Colorado was passed by initiative, but Iowa does not have the initiative or referendum. Any effort to get a TABOR amendment added to Iowa’s Constitution would have to go through the legislative process.

The Tax Foundation, using government finance data from the U.S. Census Bureau, demonstrates that a TABOR provision in Iowa would have lowered state spending. Using the “TABOR Calculator” from the Tax Foundation, actual spending in Iowa from 1981 to 2009, adjusted for inflation, was $241.8 billion. If Iowa had enacted a TABOR measure in 1980, spending from 1981 to 2009 would have been $163 billion or $78.8 billion less. From 1991 to 2009, Iowa spent $177.9 billion, and if TABOR existed in the 1990s, spending would have been reduced to $135 billion or $42.9 billion less. Overall, a TABOR provision, if part of Iowa law, would have constrained state spending.

As policymakers in Iowa debate a variety of policy ideas to bring about economic growth, a TABOR provision should be considered. A TABOR provision would bring more accountability to spending and tax policy and allow taxpayers to have more responsibility. The battle for pro-growth economic and fiscal policies will not be an easy process, as demonstrated by the debates occurring in states such as Ohio and Wisconsin, but implementing pro-growth policies rooted in spending and tax reform are vital to the economic recovery of both Iowa and the nation.

John Hendrickson is a Research Analyst with the Public Interest Institute in Mt. Pleasant, IA.  This column is originally featured with In The Public Interest a publication of the Public Interest Institute.  Republished with permission.

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