Commentary

A Horsepower Boost to PAs Economic Engine

When it comes to state officials spending their tax dollars, Pennsylvanians want some restraint. That is the clear message contained in a recent statewide survey of citizens by Susquehanna Polling & Research, Inc.

Nearly 7 out of ten citizens want to limit state government spending increases, while fewer than 2 out of ten Pennsylvanians think politicians in Harrisburg should continue to have unlimited taxing and spending power.

Pennsylvanians must be beginning to feel some serious “Gs” from the speed at which state government is spending their money. State government will spend more than $16,700 per family of four this fiscal year alone. Put another way, total state spending is racing ahead at a clip of $43,524 per minute.

Given this dizzying acceleration of the cost of government, it is no surprise that support for state government spending limits cuts across party lines and regions of the commonwealth. According to the survey, 75 percent of Republicans favor the proposal, as do 64 percent of Democrats. Only 15 percent of Republicans and 20 percent of Democrats oppose such limitations. Even in the least supportive region of the state, Philadelphia, 51 percent of citizens favor the measure and only 26 percent oppose.

Apparently the cry for fiscal restraint has been heard by legislative leadership in the state Capitol. In April, Senate Majority Leader Chip Brightbill introduced the “Taxpayer Fairness Act,” which would limit increases in state government spending to the average rate of change of inflation plus state population growth for the three preceding years. The spending limit could be exceeded with a two-thirds vote of the General Assembly.

Under the Taxpayer Fairness Act, all surplus tax revenue would be placed in a Rainy Day Fund for future government spending. However, according to the Susquehanna survey, nearly 8 out of ten Pennsylvanians want policymakers to return all or a majority of excess tax revenues to taxpayers.

While the Taxpayer Fairness Act is good news from Senate leadership, the most recent proposal from the House of Representatives will be even more welcomed by taxpayers. House Appropriations Committee Chairman Brett Feese introduced the “Taxpayer Protection Plan”—with the co-sponsorship of Speaker John Perzel and Majority Leader Sam Smith—which would constitutionally limit annual increases in state spending to the annual increase in the Consumer Price Index (a commonly used measure of the increase in the cost of living).

In addition, under the Taxpayer Protection Plan, 75 percent of any surplus tax revenue would be returned to taxpayers who paid the personal income tax and the remaining 25 percent placed in the state’s Rainy Day Fund. And offering it as a Constitutional amendment would not only prevent statutory circumventions that have rendered other states’ spending limits ineffective, but it would also require voter authorization—instead of mere legislative approval—to exceed the spending cap.

Opponents of government spending limits will attack these proposals as short-sighted and detrimental to government’s ability to provide services. In fact, many will attempt to use current efforts in Colorado to override its “Taxpayer Bill of Rights” (TABOR) to argue that such spending limits are unworkable.

It is true that the Rocky Mountain State’s Republican governor has joined with the Democratic majority in the legislature to ask taxpayers this fall to allow them to exceed Colorado’s spending cap. But the problem in Colorado is not TABOR. It is another provision called Amendment 23, which constitutionally mandates enormous increases in education spending irrespective of economic conditions.

As for TABOR itself, the spending limit has provided a tremendous boost to the state’s economy and gave much needed tax relief to citizens and job creators. Since its enactment in 1992, Colorado has refunded $800 in taxes per every man, woman, and child, and the state experienced one of the strongest economic growth rates in the nation.

Colorado’s spending limit has also been criticized because of the so-called “ratchet-down” effect it has on the state budget when tax revenues drop during a recession. In Colorado, this caused state spending levels to be reset at a lower level. This “problem,” however, would not be the case with Pennsylvania’s proposal because the Rainy Day Fund would likely help maintain spending at pre-recession levels.

Fortunately for Pennsylvanians, the relatively minor side effects experienced in Colorado are irrelevant to the House and Senate spending limit proposals. What is relevant, however, is that enactment of the Taxpayer Fairness Act and the Taxpayer Protection Plan will certainly slow down the spending lobby’s ever-racing motor, and give a horsepower boost to Pennsylvania’s real economic engine—hard-working citizens and job-providing entrepreneurs and businesses.

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Matthew J. Brouillette is president & CEO of the Commonwealth Foundation, an independent, non-profit research and educational institute located at the foot of the Capitol in Harrisburg.

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