Thursday, October 12, 2006

Limiting Government Spending Growth in Nebraska: A Rejoinder

Recently Mr. Mark Intermill, advocacy director for AARP Nebraska, critiqued my latest essay in the Omaha World-Herald in which I called for a significant reduction in Nebraska state spending growth. While I certainly appreciate Mr. Intermill’s attempt at analysis, I disagree with many of his findings and assessments.

First Mr. Intermill argues that the data that I used from the Tax Foundation comes from a “discredited source.” I am not certain who has discredited this organization which has been conducting tax research for almost seven decades. To quote former President John F. Kennedy, "The Tax Foundation’s distinguished record of accomplishment should be a source of pride to its members, who deserve the thanks of all our citizens for their dedication to a task which contributes so much to the effective functioning of the American democratic system." While not stated, Mr. Intermill implies that somehow this Washington organization is behind a conspiracy to make Nebraska’s government look like spend thrifts. Unfortunately for Mr. Intermill’s argument, both The Tax Foundation and the U.S. Census Bureau show a consistent and disturbing upward trend in Nebraska’s ranking in terms of relative tax burdens. It is certainly plausible that Nebraska’s ranking may be lower, or higher, than that estimated by The Tax Foundation. However it is indisputable that Nebraska has risen dramatically among the states in terms of its relative tax burden since 2000.

Second, Mr. Intermill alternates between the use of government spending per capita and as a share of income to support dubious propositions. From the beginning of my essay to the end, I used spending as a percent of personal income as a measure of relative tax burdens. If Mr. Intermill wishes to use per capita spending as a benchmark, I encourage him, for the sake of clarity, to use it throughout his exposition, and not conveniently switch back and forth to demonstrate a point.

Third, Mr. Intermill argues that I did not clearly demonstrate a causal link between tax burdens and economic growth. I agree. However, to more accurately show this relationship goes beyond the scope of a daily newspaper. Instead, I encourage Mr. Intermill to obtain a copy of the Southern Economic Journal, a top peer-reviewed journal, to review an article that I co-authored which more definitively demonstrates my point regarding the negative relationship between tax burdens and economic growth (Vol. 62(2), pages 320-333). If Mr. Intermill has undertaken and completed similar peer-reviewed work with findings contrary to mine, I encourage him to provide Nebraska voters with access to it.

Fourth after criticizing me for drawing a casual link between tax burdens and economic growth, he contends that Colorado, which enacted a constitutional amendment to limit government spending (termed TABOR), had slower growth between 2000 and 2006. Unfortunately for Mr. Intermill’s argument, TABOR was passed in 1992. Between 1992 and 2006 comparative growth rates were: Wage and Salary-Colorado 127.4 percent, U.S. 93.0 percent; Job-Colorado 43.4 percent, U.S. 24.4 percent; Per Capita Income-Colorado 82.7 percent, U.S. 73.6 percent. I will not take the reckless position that spending limits were solely responsible for Colorado’s superior economic performance. I will, however, assert that the data do not show that passage of TABOR harmed the Colorado economy.

Finally, Mr. Intermill contends that limiting state spending growth would automatically result in higher property taxes via reductions in state support for local programs and initiatives. To quote Intermill, “It's a simple matter of connecting the dots.” He conveniently omits the fact that LB1114 limits property tax rates in the state. If Nebraskans desire greater local spending, they must override the LB1114 limits. Thus, property taxes will only increase if the citizens wish for them to increase.

To summarize my position, I am not encouraging the adoption of constitutional amendments to limit government spending growth. However, I am pointing to the positive outcomes from legislative restrictions on the growth in the relative size of state and local government.

Ernie Goss

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