Closing Windows on Taxpayer's Rights

The Constitution of the United States of America.

What a powerful opening statement for a blog.  Embodied in that document is the reason the United States has led the world in progress, affluence, and compassion for over 200 years.  It is because of the Constitution’s limits on government and protection of individual rights that society has advanced more in the last 200 years than in the previous 5000 years. 

The Taxpayer’s Bill of Rights (TABOR). 

Not quite as captivating, is it?  It doesn’t really stir one’s emotions.  But while the Constitution enabled great achievements by limiting the federal government, TABOR has helped to protect progress in Colorado by limiting our state government.   

California, believe it or not, preceded Colorado in protecting taxpayer’s rights with the GANN amendment.  Like TABOR, it limited the growth of state revenue to inflation plus population growth.  In the late 1980’s California repealed GANN. How has that worked out for them?  They are currently struggling to reduce their budget deficit from $25 billion to $9.6 billion. Let’s compare that to Colorado.  This year, our legislature succeeded in closing a $600 million budget shortfall. While it’s a constitutional requirement that we have a balanced budget, it’s TABOR that kept the size of government in check and prevented us from having an impossibly large shortfall like in California. 

Now Herb Fenster, an attorney from Boulder, is suing the state over the constitutionality of TABOR.  Fenster is the German word for window, and you can see right through him.  He’s another elitist who would prefer that common people remain powerless. The lawsuit asks the courts to make new law and remove power from the people.  Both purposes are antithetical to the republican form. If successful, Fenster’s lawsuit would vest power in the hands of unelected judges, and lawmakers who are more concerned with re-election than with the rights of citizens. 

Fenster’s lawsuit hinges on the “guarantee clause” of the US Constitution: “The United States shall guarantee to every State in this Union a Republican Form of Government…” In Fenster’s view, this means that citizens have only the power to elect representatives, but no power to enact laws, vote on tax increases, or amend our state constitution.  Fenster is wrong. 

According to constitutional law scholar Robert G. Natelson, the Guarantee Clause “meant that the federal government was obligated to intervene if the rule of law broke down within a state, or if a state erected a monarchy or government immune from citizen control…Otherwise, the states had broad power to choose their own style of governance…Although most of the Founders were not devotees of direct democracy, they did make it clear that it was consistent with the republican form for the people to exercise the legislative power directly.” 

The Declaration of Independence has a recurring theme: that all men are created with unalienable rights. To put it another way, each individual has sovereign power.  The Constitution was crafted to protect the sovereign power of individuals. They wanted to avoid a monarchy.  Until the colonies declared themselves to be free, they were under the rule of King George.  In a monarchy, only the King has sovereign power.   

According to Natelson, there are three required elements of a republican form of government:  1. Rule by the majority [or plurality] of participants, 2. The absence of a monarch, and 3. The rule of law.  These three elements combine to ensure that individuals retain their sovereign power. 

The Founders also created a system of checks and balances.  They understood that democratic institutions were an effective check against excessive representative powers.  The republic of Rome was held out as an example.  James Monroe, quoting Polybius, said of Rome, “…there was a…mixture of aristocracy, democracy, and monarchy, each of which had a repellent quality which enabled it to preserve itself from being destroyed by the other two, so that the balance was continually maintained.” 

TABOR protects the rights of individuals against a rapacious government that will use your money to expand its power and rob you of yours.  Because it limits government, TABOR is very much in line with the wisdom of the Founding Fathers and the Constitution of the United States of America.

House Paint, Stock Shows, and Shopping Malls

Backyard Bail-Outs?

 Sometime soon my house will need a paint job (I mention this at risk of an onslaught of painting companies soliciting my business).  If I don’t repaint, my house will likely lose value.  If I neglect it long enough, my neighborhood will lose some of its value.  As values go down, property taxes go down.  Clearly it’s in the best interest of my neighbors and government to get my house painted.

But we are in a depression.  I mean a recession.  Pardon me, we are officially in a recovery.  Somehow that doesn’t help me afford paint. My income has taken a drastic hit due to this economy, no matter what it’s called.

So here’s my plan: If all my neighbors pitch in and help me buy the paint and rent the equipment, I’ll paint my house.  All will benefit by having a nicer neighborhood with higher home values.  The taxing districts that rely on property taxes will benefit as valuations rise.

Some of my neighbors might not want to help. That’s not fair to the others since all will benefit.  We’ll create a Paint Renewal Authority.  The Authority will borrow the money and give it to me.  They will repay the debt with the higher property taxes in my neighborhood.  After all, those higher taxes won’t happen if my house remains unpainted.  Which I won’t do if I can’t afford it.

Trust me: I’ll use good paint and superior workmanship. I won’t sell my house to an illegal drug or prostitution ring.  I’ll faithfully water my lawn and maintain my property so that the Authority’s investment in my property will be safe, and all my neighbors will benefit. And you can rest assured that the higher property values in my neighborhood are entirely attributable to my fresh paint.

Economic Development?

On a much larger scale this is just one form of tax incentive that economic development authorities use. It’s called Tax Increment Financing, and this ridiculous scenario takes place across the country.  Economic development authorities use these incentives to attract developers to build malls, office parks, industrial complexes, etc.  And taxpayers are on the hook if the authority invests poorly.

Democrats hate Wal-Mart because their low prices make it hard for Mom-and-Pop businesses to compete.  Republicans praise Wal-Mart because they offer goods at lower prices, which raise our standard of living.  But Wal-Mart is the beneficiary of tax incentives, a valuable advantage that Mom-and-Pop aren’t able to access.  A government subsidy to Wal-Mart is a disadvantage to competing businesses that don’t get a similar subsidy.  It’s a grand example of government choosing winners and losers. 

Politicians get the immediate benefit of a visible improvement to the community and can point to new jobs. What isn’t seen is the loss of small businesses and their jobs. Also, the project might not work out as well as hoped, and the additional taxes might not come in.  Perhaps the development would have occurred without the subsidy. Or, as often happens, a new subsidized project will make the old one obsolete, perhaps even before higher tax revenues can retire the debt.  The politicians may be long gone before that happens.

Recent Examples

The National Western Stock Show might move to a new location. Taxpayers may be forced to fund development of the new site, a private enterprise. Walt Isenberg, CEO of Sage Hospitality said of the plan, “Colorado…and…Denver have spent a significant amount of money building a conference center downtown.  If this hotel and conference center is built, will they cannibalize that investment?” 

The Westminster Mall has received millions in taxpayer “investments” over the years.  It was once home to 300 shops.  Then Westminster helped develop the Westminster Promenade, and then the Shops at Walnut Creek. Now Westminster Mall has 15 shops. The city is buying the mall, and you and I are once again “investing” in the property. And the Promenade is losing tenants.

Look around at the major malls and developments in our Metro North area.  Chances are they have been subsidized by you and me and Mom-and-Pop who have to compete with them. Can you feel the despair of store owners who, by virtue of years of hard work, paid taxes to fund the superstore that runs them out of business? Who will bail them out?

Health Insurance Exchanges and the GOD Law

SB-200, the law that will establish Colorado’s health insurance exchange in compliance with ObamaCare has passed the general assembly and is on its way to the governor’s desk for signature.  I was at the committee hearing where it passed its final vote before being rushed through the final passage in the house and senate.

Those arguing in favor of the bill repeatedly stressed that this is our opportunity to create a uniquely Colorado exchange.  If we don’t, the federal government will step in and do it for us.  Yet those same testifiers told us that we must pass this bill now because if we don’t show significant progress toward creating an exchange that is acceptable to the federal Department of Health and Human Services by January 1, 2013, the feds will take over the job for us.

Therein lies the weakness of the argument.  Our exchange must meet the federal government’s standards.  The law (ObamaCare) mandates that the exchanges cannot be less restrictive than the federal government’s requirements.  That leaves one option for making it “uniquely Colorado” – make it more restrictive than the federal requirements.  We will at best have a program that mimics what the federal government would do.  At worst it will include more mandates that raise the cost of health insurance.

Majority Leader Stephens has said that "conservatives at all levels have touted the free market virtues of healthcare exchanges..."  But that is a mischaracterization of what conservatives promote.  The Heartland Institute for example says, “Encourage the creation of private exchanges (emphasis mine). Small, medium, and large businesses, trade associations, and civic associations should be able to set up their own market based insurance exchanges to offer their employees and members a wide range of possible insurance alternatives.” And that is the last of their eleven recommendations for healthcare reform.

State run insurance exchanges are required by ObamaCare. Without them, ObamaCare cannot be implemented.  States that comply are assisting in a federal takeover of our health care system.  ObamaCare is one of the two most dangerous policy issues facing America, the other being EPA regulation of carbon dioxide. Our State Attorney General sued the feds over the constitutionality of ObamaCare. Our compliance with SB-200 is legitimization of ObamaCare, essentially giving the keys to the federal government. If we allow ObamaCare to stand, the government will have power over every aspect of our lives.  The economic liberty and protection of private property that made America the greatest country in history will be over.

Representative Riesberg (D- Greeley) objected to the use of the term ObamaCare during testimony. Because of the immeasurable harm to our economy and liberty that ObamaCare will cause, I would suggest a new term – The GOD Law.  Game Over, Dude.

Reasons for Optimism

I’m standing at a door.  Outside, the wind howls at 90 miles per hour.  I step out and I’m falling.  As the airplane flies away, I plummet towards the earth, 13,000 feet below. In the back of my mind, I know that if I failed in any of my preparations, I could die. 

I had carefully packed my parachute.  The reserve parachute was packed by a certified specialist.  I had practiced countless times.  Before I jumped, I carefully checked to make sure we were over the landing area. I wore a helmet, in case I had a collision with any of my friends who jumped with me.  If I lost consciousness a device would automatically open my reserve parachute.

Back in the day, I made over 3800 skydives.  I’d say that’s pretty good evidence that I’m an optimist.  But it’s more than just optimism.  I carefully studied the risks and took care to reduce or eliminate those risks. Skydiving is a sport that’s governed by the laws of physics.  Gravity is a constant. Parachute openings are consistent within an acceptable range. The physics of freefall are known, allowing me to control myself in freefall and get away from others to safely deploy my parachute.  A sport that many consider to be “extreme” is really about controlling acceptable known risks.

Let me tell you what IS extreme: owning a small business. I’ve owned my own businesses for over 20 years. There once was a time that you could take a good idea, develop it, market it and make a living as a business owner.  Yes, there was risk involved, and there have always been business failures because there is always risk.

I was young and naive when I started my first business.  I built my facility, bought equipment, hired staff, got the word out and opened for business. Then I had to make payroll.  I remember the shock of payroll deductions in my first paycheck as a teenager. As a business owner I experienced a whole new level of shock when I wrote a monthly check to cover payroll taxes for all my employees.  But that became a knowable expense, so it was no longer a risk.  The biggest unknown was the economy. But as the business cycle fluctuated within acceptable limits, I could control for that risk by saving money during the good times to carry my business through the bad times.

Today the biggest risk to business comes from our own government. It expands at an alarming rate and consumes an ever greater share of the economy. The proliferation of taxes, rules and regulations can leave a company wondering what’s next.  There’s simply no way to plan when the rules change so quickly.  You can’t plan for the unknown.

100 lawmakers in Colorado’s General Assembly have submitted 666 new bills this year.  That’s potentially 666 new laws plus all the rules that are required to administer and enforce those laws.

In Congress, 535 lawmakers mandate untold numbers of bureaucracies in which unelected and unaccountable officials promulgate rules with little consideration of the effects on businesses and individuals.

Local governments exercise their broad powers in senseless ways, like prohibiting barber poles, entering rental properties under court order for unnecessary inspections, and mandating additional trash services.

The list of infringements on personal property and individual rights is endless and growing. Can you imagine investing your money, time and hard work to turn that great idea into a business under these conditions? Like jumping out of a plane without a parachute, it’s difficult to imagine how you would survive.

Still, I’m an optimist.  To paraphrase Milton Friedman, there are three reasons to be optimistic.  First is the “extraordinary ability and ingenuity of the American people in finding ways to get around laws.”  The desire to improve one’s lot in life will continue despite the force of government.  Second, government is inefficient.  Were it otherwise, we would already be serfs.  Government simply is too wasteful to rein in a population that seeks to remain free.  Third, the waste is so obvious and the infringements on freedom so great that people are demanding a return to limits on government. When liberty and property are respected and protected, Americans will return to business.