Joshua Meyer Testimony in Missouri: Taxpayer Bill of Rights

ALEC Tax and Fiscal Policy Task Force Director Joshua Meyer was recently invited to testify before the Missouri House Ways and Means Committee about how tax and expenditure limitations would impact the state of Missouri as it considers a Taxpayers’ Bill of Rights.

You can read his testimony below:

Dear Chairman McGirl, Vice Chairman Davis, and Members of the Committee,

My name is Joshua Meyer and I serve as the Director of Tax and Fiscal Policy at the American Legislative Exchange Council. I appreciate the opportunity to share ALEC’s nonpartisan research and analysis as you consider how tax and expenditure limitations will impact the state of Missouri.

If I may offer a brief note of terminology for my testimony: Tax and expenditure limitations are a category of policy instruments that limit the amount of funds government can retain and spend. Most state have some form of tax and expenditure limitation, but they are not all created equal. Colorado’s Taxpayer Bill of Rights, or “TABOR,” is widely considered the gold-standard of tax and expenditure limitations. Language similar to TABOR has been passed as an ALEC model policy. TABOR has improved that state’s economic competitiveness, limited government spending, prevented tax increases, and put billions of dollars in the pockets of hardworking Coloradans. On the opposite end of the spectrum, Maryland has a tax and expenditure limit which is a statutory recommendation the legislature may make and which the governor has no obligation to follow. Missouri, of course, has its own tax and expenditure limit, the Hancock Amendment, with components of varying effectiveness. Not wanting to digress, I will keep this testimony focused on the legislation before the committee.

HJR 169, the “Taxpayer Protection Act,” includes the two key components which define both TABOR and the ALEC model policy. Those are a robust state spending limit tied to inflation plus population growth and a requirement for voter approval in order to increase taxes.

This is a Madisonian approach to slowing the fiscal expansion of government. It applies checks on such expansion, allowing spending to continue at a per-capita inflation-adjusted level, but requiring voter approval to go beyond. As Dr. Milton Friedman was famous for noting, spending is the true measurement of the tax burden.

TABOR and the proposed Taxpayer Protection Act apply to both the state and local units of government. This makes it a capable policy tool for addressing unconstrained property tax growth. When property assessments increase, local officials may hold tax rates constant, yet residents may still receive higher tax bills. Hence the local unit of government receives windfall revenue from increases in property values. Those higher values, of course, do not always necessitate a higher level of government services—yet revenues increase. These spending limits hold local officials accountable in these situations, not just for property taxes, but for all revenue streams. Spending may not be increased beyond the limit without voter approval.

TABOR became a Constitutional Amendment in Colorado in 1992, providing us with more than 30 years of data on this policy in practice. In many ways it has stood the test of time, with the limit’s continued effectiveness in recent years as an example. TABOR and the Taxpayer Protection Act leave the question of how revenues in excess of the spending limit shall be returned and Colorado has utilized a variety over the years, including income tax rate reductions and sending refund checks directly to taxpayers. In 2023, for example, each taxyaper in Colorado received an $800 check as part of that year’s TABOR refund. It should be noted that these checks, the most salient way Coloradans interact with TABOR, are not like the economic stimulus checks sent to Americans during the COVID-19 pandemic. It is, of course, not new money being printed and as such is not inflationary. The funds represent taxpayer dollars which have been collected and returned.

The American Legislative Exchange Council maintains the Fiscal Rules project, at fiscalrules.org, to inform Americans and policymakers on tax and expenditure limitations and the potential impact of TABOR-like policies in the states. The project estimates that, had Missouri enacted a strict TABOR-style policy, like this Taxpayer Protection Act, in 1992—the same year Colorado enacted it—the Show Me State would have saved taxpayers $151 billion dollars over 30 years. This averages to $4.9 billion annually and $829 for every man, woman, and child in Missouri each year.

The State of Missouri’s extensive experience with the Hancock Amendment means the principles of tax and expenditure limitations are not unfamiliar: It is too easy for governments to continue the budgeting-as-usual approach, where spending is constrained only by the revenue available. TABOR and the Taxpayer Protection Act demand that policymakers and taxpayers ask questions about the proper role of government, the costs of public programs, the performance of existing programs, and the prioritization of policies.

Respectfully submitted,

Joshua Meyer

Director, Tax and Fiscal Policy

American Legislative Exchange Council