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November 7, 2005, 5:45 P.M.

Tax Caps: Last week tax cap proponents in the State of Colorado were dealt a serious blow. Colorado voters narrowly approved a measure to allow the legislature to override the cap and fund needed budget initiatives. Without the override, Colorado residents faced draconian cuts in education, infrastructure repairs and other essential state services.

The Colorado state budget cap was put in effect in 1992 as a part of what was then referred to as a Taxpayers Bill of Rights (TABOR). The recent vote will suspend provisions of the cap and will allow the state to keep $3.7 billion over the next five years that would have been refunded to the voters had the referendum, known as Referendum C, not passed.

Referendum C was approved by 52% of Colorado voters, and its passage has done serious damage to tax cap initiatives in other states because it signals the failure of tax caps as budget control measures. Amid skyrocketing tuition costs, crumbling roads and the specter of deep cuts in what the state deemed essential services, Colorado Governor Bill Owens, a Republican, championed the move to suspend the cap. Owens argued that he was actually saving TABOR because without a temporary breather, the state faced a fiscal crises and the inability to pay for essential services. This, said Owens, could have lead to a repeal of the whole law. Supporters of TABOR and national advocates for tax caps called Owens a traitor.

Passage of Referendum C is seen as a blow to the national tax cap movement because it highlights in a big way the serious damage that arbitrary caps of this type can do to a state (or local) economy. The Colorado tax cap, and the way it functions during lean economic times, points out a major flaw in the concept. While the cap reduced spending in a period of recession, it locked in those levels even as the economy improved, depriving the state of its ability to manage and restore critical programs cut during lean times. In short, it allowed no flexibility in the management of government resources and it hog-tied legislators and state agencies in their ability to adapt to changing economic conditions. The result was money needed for the reconstruction of aging highways and bridges, among other things, was simply not available.

Laconia is faced with a decision. Proponents of the tax cap suggest that it is a viable mechanism to control what they see as excessive government spending. What the cap really is is a yoke around the neck of our city government that will restrict our ability to continue the positive momentum of the past decade. The way to control spending is to get involved: to support candidates who will spend responsibly and who will be good stewards of our treasure now and in the future, not to impose a flawed, arbitrary cap on spending that will hinder our ability to continue to make Laconia a great place to live, work and play, attractive to visitors and new residents alike.

Make no mistake, the tax cap will not only harm the school budget at which it appears to be aimed. The progress that has been made toward restoring our infrastructure will also suffer. The tax cap will not discriminate by “department,” and it will surely not change the way that the city budget is constructed. It will eventually stifle growth and cause a cutback in services that our tourism-driven economy cannot afford. We must have good roads, parks and beaches to meet the needs of visitors, and good schools, police and fire services to continue to entice those visitors to linger a little longer and to settle their families and businesses here.

Colorado proved that the tax cap is a bad idea, and that it has done more harm than good. Our city council is elected every two years and, by getting involved in the process of government, we have the opportunity to decide who we believe will serve in our best interests.

I don’t expect to agree with every decision made by an elected official, whether I support them or not. What I do expect is that they will educate themselves about our city’s needs and our expectations and that they will use their good judgment in considering what is best for all of us now and in the long run. Through this process, we control our own destiny. A tax cap is a cop out. It is easy for elected officials to fall back on the tax cap and avoid making the hard decisions: “Gee, I’d love to fix those roads/schools/beaches or support our police/fire department, but I can’t because of the tax cap.” It also takes away the debate in the community about what is truly needed. Governor Owen found out that it just doesn’t work. His support of Referendum C was seen as political suicide. At least he can go out knowing that he had the strength to do the best thing for Colorado. We can do the best thing for Laconia by voting “no” on our own tax cap initiative.


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