Lee Schalk Testimony on Proposed Arkansas TABOR Amendment
At ALEC, we are encouraged to see that Arkansas is considering its own Taxpayer Bill of Rights.
Lee Schalk, ALEC Senior Vice President of Policy, testified before the Arkansas House Committee on State Agencies and Governmental Affairs sharing ALEC’s research regarding HJR 1005 (sponsored by Rep. Wayne Long and ALEC Board Member, Sen. Jim Dotson) which would amend the Arkansas Constitution to create the Arkansas Taxpayer Bill of Rights.
Chairman Gazaway and members of the House Committee on State Agencies and Governmental Affairs:
My name is Lee Schalk, and I am the Senior Vice President of Policy at the American Legislative Exchange Council, also known as ALEC. Thank you for the opportunity to share ALEC’s nonpartisan research and analysis today regarding the House Joint Resolution to amend the Arkansas Constitution to create the Arkansas Taxpayer Bill of Rights.
Founded more than 50 years ago in 1973, ALEC is the nation’s largest nonpartisan, voluntary membership organization of state legislators dedicated to the principles of limited government, free markets, and federalism.
The ALEC Center for State Fiscal Reform provides policymakers with dependable economic and fiscal policy research to produce better economic outcomes for all Americans. This includes annual publications like Rich States, Poor States, which ranks the economic competitiveness of the states, resources such as the microsite FiscalRules.org, and other reports such as What States Can Learn from Colorado’s Taxpayer Bill of Rights.
Because the proposed Arkansas Taxpayer Bill of Rights has a number of similarities to Colorado’s Taxpayer Bill of Rights, also known as TABOR, I would like to share the impact that this amendment to the Colorado Constitution has had over the past 32 years and counting. In short, TABOR has protected Colorado taxpayers despite the state shifting to become a predominantly blue state over the last three decades.
But first, there is a problem that needs to be addressed.
While we can all agree that the federal government has a spending problem, we don’t often hear about the overspending issue at the state level. Even after accounting for changes in inflation and population growth, we’ve seen state government spending increase by more than 90% over the past four decades.
The problem is that there is little focus on efficiency, effectiveness, or outcomes. Failing initiatives and programs are given more money year after year with little accountability or expectation of deliverable results. Revenue shortfalls lead to cutting programs, raising taxes, or accounting gimmicks. State spending growth is far outpacing population, inflation, and private sector growth.
Today, with Elon Musk and the Department of Government Efficiency dominating policy discussions, states should consider that one of the most effective tools to control the growth of government revenues and expenditures – if properly designed – is called a tax and expenditure limit or TEL. These policies help limit government spending and taxation while stabilizing budgets over the business cycle. While more than 30 states currently have some version of a TEL in place, many lack enforcement mechanisms, are easily overridden, are full of exemptions, or allow high rates of spending growth.
The Colorado Taxpayer Bill of Rights was approved by voters in 1992 as constitutional amendment, and it is considered the gold standard of state tax and expenditure limits. Colorado’s TABOR limits the amount of revenue the State can retain and spend to changes inflation and population growth.
If Colorado state lawmakers want to spend surplus revenue, increase taxes or fees, or increase debt, they are required to submit the proposed measure to the ballot and win the approval of a majority of voters. Ballot measures must clarify how the funds will be raised and allocated. Taxes can still be increased, but it takes a vote of the people to do so. In 32 years of TABOR, very few statewide tax increases have been approved.
For example, in 2013, Colorado voters decided on Amendment 66 which would have raised personal income taxes. That measure was soundly defeated 66% to 34% despite its proponents raising $10 million.
November 2022 marked 30 years of Colorado’s TABOR returning billions of dollars to, and providing important protection for, hardworking Colorado taxpayers. But perhaps most importantly, TABOR has helped the state maintain a serious economic advantage even as Colorado has drifted left politically.
As former Colorado state representative Patrick Neville put it, “TABOR is the only thing keeping us from becoming East California.”
In fact, TABOR is credited for very recent state income tax reductions. Colorado lowered its flat personal income tax in 2022 from 4.55% to 4.4% — and again in 2024 to 4.25% while also refunding $1.7 billion in excess revenue to taxpayers. Coloradans have been refunded a total of $9.4 billion over the last four years alone. This is money that would have otherwise gone to the growth of government, but by returning money to taxpayers, the state enables more growth in the free market.
Back in 1992, critics condemned TABOR and said it would cause businesses to flee Colorado and the economy to collapse. But TABOR has helped make Colorado one of the most competitive and fastest-growing economies in the nation over the 32 years since its implementation. Not only has Colorado’s TABOR kept government spending in check, but it has signaled a long-term commitment to state fiscal responsibility. As Americans “vote with their feet” in search of economic opportunity, Colorado has been one of the biggest recipients of inbound domestic migration, attracting nearly 340,000 new residents on net over the last 10 years.
At ALEC, we are encouraged to see that Arkansas is considering its own Taxpayer Bill of Rights. I hope our ALEC nonpartisan research and analysis is helpful, and I am happy to answer any questions the committee may have.