Sunday, February 26, 2006

Limiting Taxation and Expenditures

A while back, it was announced that Jim Petro has come out with his own version of a “taxation and expenditure limitation” (TEL) amendment. Both Ohio Republican gubernatorial candidates have proposals to put the reins on the outrageous explosion of government largess, as has occurred under many, many years of an out-of-control Republican Party that has dominated our State government. Since 1994 alone, the state government has expanded 71 percent, and is on pace to double every 13 years.

(I’ll pause to let you Fry Guys who think the Republican Party is interested in your small government ideas to reflect on that.)


Blackwell’s amendment, Tax Expenditure Limitation (TEL), limits state spending to 3.5 percent or the rate of inflation, plus the increase in population.

But then, Jean Pierce, Blackwell’s campaign manager goes on to say:

“We’re not shutting government down, we’re just saying it shouldn’t grow faster than the ability to pay.”

Now…if that were really the case, then why does the Blackwell version have an escape clause to allow for the continuation of government growth, if "inflation+population" amounts to less than 3.5%? Why not leave the TEL at inflation plus population change? In real terms, that would do more to keep government at a constant size, relative to “the ability to pay” than anything else.

In fact, the Libertarian Party of Ohio endorsed just such a TEL about a year ago. The original plan , created by the Buckeye Institute for Public Policy Solutions , called for:


- Limiting state and local government spending to the inflation rate plus population growth;
- Requiring the state legislature to rebate any surplus revenue to taxpayers;
- Requiring voter approval for new tax increases extending an expiring tax or approving a tax policy change the increases net revenues for government;
- Requiring voter approval for spending above the limits set by the TEL

So why does Blackwell want an escape hatch to continue to grow government? The only answer I can come up with is that he is insincere in his desire to limit government. He still wants the ability to loot honest, hardworking Ohioans, for the benefit of he and is cronies.


Petro’s amendment, Citizens’ Amendment for Prosperity (CAP), limits the amount of general fund revenues the state may collect to 5.5 percent of the total personal income earned in the state.

Petro’s amendment isn’t any better than Blackwell’s. Focusing on a budgetary constraint that has a set relationship to the amount of income Ohioans are earning, it does seem, intuitively at least, to constrain government growth to an ability to pay. However, the devil is in the details.

If revenue collections exceed the revenue limit by more than 2.5 percent, the CAP requires the state to return that money to taxpayers in the form of an income tax credit. For example, if revenue exceeds estimates by 4.5 percent, the first 2.5 percent would be placed in a rainy day fund and the remaining 2 percent be returned as a tax credit.

So, if the limit is 5.5% of personal income…then how come an amount above that can still be collected, and rediverted to a “rainy day fund”? Furthermore, do we REALLY trust policitians – Republican politicians, who have demonstrated ZERO lack of fiscal responsibility – to really set that money aside for a “rainy day”?

Besides… Government is NOT a bank. The State should not be taking money and hoarding it for future use on political pet projects and other largesse. Petro seems to think that that idle money sitting in a “rainy day fund” is being more productive than if left in the hands of private citizens and businesses to use in supporting themselves and their families.

If either candidate had any sense whatsoever, they’d be looking for REAL solutions to our economic problems, which can be summed up in two words: Government Spending. Last year, the Buckeye Institute published the 2005 Piglet Book , which identified $3.5 BILLION of unnecessary State spending. That’s $3.5 billion dollars that could be cut from the budget, and not affect any core functions of government, nor any of the “big ticket” areas of the State bureaucracy, like education, healthcare, and criminal justice.

Libertarian Candidate Bill Peirce , an economist by profession, has a much more comprehensive plan to untie Ohio’s economy. Instead of trying to pick between two lawyers, I’d rather vote for someone who has spent his life studying economic issues. Granted, Peirce’s proposals is far from the libertarian “ideal”, but his platform shows a remarkable maturity and pragmatic approach to moving the State government back towards responsibility and discipline than either of the Republican candidates. Libertarians have heard for years that many of their proposals were “too radical”, “unrealistic”, and that “you can’t turn the ship around without slowing it down first”. Well, what exactly is so “radical” about Peirce’s proposals? They seem to be very palatable to me, and for as “hardcore” as some have charged me, I can honestly say that Peirce is someone I can vote for.

There is nothing wrong with taking “baby steps”, as long as the steps are truly in the right direction. The direction I see the Republican proposals are still in the same (wrong) direction.

So…Set aside the whole “wasted vote” myth, and evaluate the proposals. Ask yourself, are Libertarians trying to earn your vote? Are they offering you more of what you want? Or will you continue to vote for the scaremongers in the R and D parties who want to carry on business as usual?

7 Comments:

Blogger Lisa Renee said...

Thanks Jason, this was very well done and a timely reminder of some of the facts. I've fallen into the trap myself of not writing enough about Bill Peirce. It's important that what he is trying to do not get lost in the drama production between the two main parties.

1:25 PM  
Blogger Libertarian Jason said...

Thank you, Lisa...

2:46 PM  
Blogger Paul A. Miller said...

Well-stated arguments, Jason. Strategically, Peirce would have been wise to go out and get the Buckeye Institute proposal on the ballot in amendment form. Petro probably would never have bothered with CAP, Blackwell's challenge would have been from the side of more fiscal restraint, and Peirce would have had a rallying issue which could have drawn voters to his message.

Maybe he's planning something like this, I don't know. The key for any "third party" candidate is to draw the masses to a specific issue. Perhaps this is the one.

P.S. - You have a unique viewpoint - I'd love it if you shared your posting links with readers of the Carnival of Ohio Politics (http://northwestohio.net/cblog/archives/89-Carnival-of-Ohio-Politics-11.html).

10:15 AM  
Anonymous Libertarian Jason said...

Paul -

I would love to do that. But I'm a little low-tech... How exactly do I accomplish that?

Re: the CAP.. The thing is.. it takes MONEY to get an amendment put on the ballot.. Money that Libertarians do not have much of... Most of the money Peirce is raising is probably going toward basic campaign necessities (literature, website, etc.) and getting HIMSELF on the ballot (that alone will cost more than 10 grand...).

Thanks for stopping and reading. I'll look into getting that sharing thing set up...

11:29 AM  
Anonymous ken said...

One important exception is that any proposed law should allow for temporary dips in spending. Colorado passed the TABOR amendment (tax payers bill of rights) which is quite similar to what you're discussing. It's worked reasonably well, but during the 2001 recession, the state drastically cut its spending, and couldn't bring it back up again. Because spending was indexed to the last year's spending, once a cut was in place, it couldn't be rolled back. Ballot initiatives in 2005 allowed the state to resume pre-recession spending, but it was a clear problem with the amendment.

1:36 AM  
Anonymous Libertarian Jason said...

It's worked reasonably well, but during the 2001 recession, the state drastically cut its spending, and couldn't bring it back up again. Because spending was indexed to the last year's spending, once a cut was in place, it couldn't be rolled back.

My first reaction is....boo hoo! And why is that bad?

My second reaction is...are we REALLY talking about a cut in spending? Or a cut in the spending growth? If it was a REAL cut... We spent X number of dollars last year, and this year we will spend a number lower than X...then I'd be very surpised. Politicians aren't exactly known for their frugality.

But in any event...what's your point? Are you trying to say that we should try to maintain the ability of politicians to spend as much of our money as they can, regardless of whether we can afford it?

In a recession, a government should cut its spending...to put more resources back into the productive sector... Keynesian prescriptions for increased spending during recessions are myopic and misguided.

8:36 AM  
Anonymous ken said...

I am talking about real, actual cuts in spending. As in, in absolute dollars, Colorado spent less money in 2002 and 2003 than in 2001 or 2000. The reason that's bad is, it discourages spending cuts. There's an old bureaucratic adage ... if an agency wants the same funding next year, it has to spend everything it gets this year. A TABOR-style amendment, if not fixed, is purely pro-spending, because the government is penalized for cutting spending.

I'm not entirely opposed to TABOR, but that was a very profound oversight in its design. Current spending should be indexed over a ten year, not one year, period in order to account for economic fluctuations.

8:12 PM  

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