Earlier this week, the Senate Tax Committee met to discuss the Governor’s proposal to amend the constitution to cap state spending.  The state already has a constitutional requirement to balance the state budget; all Pawlenty’s amendment would do is require that general fund spending in the current biennium equal the revenues generated in the last biennium.  Thus, if there’s a deficit, the problem could only be solved by cutting spending, not increasing revenue, thereby reducing the options open to state policymakers, restricting the ability of government to respond to the demands of the public, and ensuring that the “no new tax” tribe win every dispute on deficits.

At one point during the Senate Tax Committee discussion of the amendment, Senator Tom Bakk (Cook) said that income taxes and the overall “price of government” (i.e., total state and local own-source revenue as a percent of statewide personal income) has declined over the last decade.  To this point, Senator Warren Limmer (Maple Grove), an amendment supporter, argued that sales taxes and property taxes have increased in recent years.

Both senators were correct.  While specific taxes have increased, others have declined and the overall size of government relative to statewide personal income has declined.  Sadly for low and moderate income families, regressive taxes (sales and property taxes) have increased as a share of total public revenue, while progressive taxes (the income tax) have shrunk.  These trends have shifted a larger share of state taxes on to those families with the least ability to pay.

While Senator Limmer is certainly correct that property taxes have increased, Pawlenty’s constitutional spending amendment will only accelerate this trend.  During the “no new tax” era, state government has solved its recurring budget problems largely by cutting state dollars shared with counties, cities, and schools, thereby compelling local governments to simultaneously cut budgets while increasing property taxes.  The fiscal straightjacket imposed by the amendment will constitutionally guarantee similar outcomes in the future; the state will not be able to solve any portion of its deficit problem through an increase in state taxes, so it will of necessity continue to chop away at the property tax relief dollars that the state shares with local governments.  This will cause even more public costs to be shifted on to low and moderate income families.

Pawlenty’s constitutional spending cap falls under the broad category of proposals known collectively as “taxpayers’ bill of rights.”  Dane Smith, President of Growth & Justice, hit the nail on the head when he told the Senate Tax Committee that the proposed constitutional amendment could be more aptly called a  “taxpayers’ bill of goods.”

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