1. An increase in state sales taxes of $1 billion a year for three years.
2. Reforms that would allow the Legislature to make reductions to areas of the budget that have been protected from cuts by past voter mandates.
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The third item is new. TABOR was not in the package proposed by Brewer in early March, when she first floated her proposal to refer a temporary tax increase to the ballot.
At first glance, this “Grand Bargain” would seem to have something for everyone at the Legislature. A temporary tax increase would allow liberals to avoid making large budget cuts. Reform of voter-mandated spending would allow moderates to distribute budget cuts more evenly across all areas of the state budget. TABOR would give fiscal conservatives the best spending limit in the country, and keep the state government from resuming its disastrous pattern of rollercoaster budgeting during the next economic boom period.
Without TABOR, Brewer’s package is a very bad deal for fiscal conservatives. With TABOR, the package is very tempting. But several tough questions plague the proposal.
How long will the TABOR limit last?
If fiscally conservative legislators had the option of suffering the economic and political damage of Brewer’s temporary tax hike, in exchange for a truly permanent spending limit, most of them would probably take the deal. But the political reality is that the spending lobbies, with help from judges, will eventually chisel large holes in even the strongest spending limits. That’s what happened to California’s Gann Limit on spending passed by voters in 1979 and to the original TABOR approved by Colorado voters in 1992.
Can the package get past the judges?
To gain the support of fiscal conservatives, TABOR would have to be attached in a bombproof manner to the other two referenda. It is unclear that the Legislature and governor could successfully evade the single-subject rule and legally bind the three proposals together, through conditional enactment clauses in all three referenda.
If judges separated the three proposals on their way to the ballot, the result could be disastrous. The spending lobbies and tax-takers (who are much more well-funded and well-organized than groups representing taxpayers) might succeed in passing the tax increase and shooting down TABOR.
What would the TABOR baseline be?
If we could set the base-year spending level low enough, TABOR could end up refunding more money to taxpayers during the next boom period than would be taken from taxpayers through the temporary tax hike. But the tax increases would raise spending in fiscal years 2010 through 2012, and would likely raise the level of base-year spending for TABOR. Given the low projections for revenues through 2012, fiscal conservatives may get lower spending — at least in the short run — by holding the line against tax increases (assuming they can do that).
Can the package even get out of the Legislature?
Liberals in both parties loathe TABOR, and it’s unclear that a legislative majority could be mustered to include it in a ballot package. Fiscal conservatives love TABOR, but they would have a very tough time explaining to constituents that they voted for a giant short-term tax increase in order to get a long-term spending limit.
Are voters likely to approve the package?
Last month, California voters rejected a similar package that included Proposition 1A’s weak spending limit. It would be a mistake for Gov. Brewer and the Arizona Legislature to put off tough decisions about spending reductions, in the hope that voters will approve new tax revenues.
Given the likely answers to the above questions, a Grand Bargain, even one that includes TABOR, looks like a bad bet for fiscally conservative legislators.
Contact Tom Jenney, Arizona director for Americans for Prosperity, at tjenney@afphq.org. The organization’s website is www.aztaxpayers.org.
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