Is a Taxpayer Referendum on Its Way to Pittsburgh?

Member Group : Allegheny Institute

Pittsburgh Councilman Burgess has introduced a measure to give City voters the power to approve or reject property tax increases. The proposed ordinance calls for a referendum asking voters if they want to change the City charter to require a referendum on all property tax increases. As Reverend Burgess notes, "this is about giving the people the power to fight a tax increase." The Councilman should be congratulated for this bold initiative.

We have been a strong and consistent advocate of voter referenda for tax hikes for over a decade. It is a public policy which could hold great promise for Pittsburgh’s future. Of course there are elected officials who are very opposed to giving voters approval power over taxes. Responding to Reverend Burgess’s proposal, a member on Pittsburgh City Council said, "you elect people, and they make those decisions." Granted, that is the way it is supposed to work. Sadly, Council’s long running inability to hold expenses down has necessitated ever increasing tax revenues to fund spending growth.

Others on Council view the ability to tax as "an important tool" in governing the City. But their power to tax has led to the profligate spending that has put the City in the bind it now finds itself in. Misuse and abuse of this "important tool" lie at the heart of Pittsburgh’s financial nightmare. Arguing for continued unrestrained authority to set tax rates is illogical and specious as well as incredibly self-serving.

Finally, there are those who worry voters will never approve a tax increase. They have every reason to be worried about that in light of taxpayers’ disgust with the inability of government to rein in spending. Still, there may be cases where voters can be convinced a legitimate need exists for additional revenue.

The Taxpayer Bill of Rights (TABOR for short) movement has been around for quite some time. Colorado was one of the first states to implement fully the concept. All tax increases at all levels of government in the state are subject to referendum approval and government expenditure growth is strictly limited to the inflation rate and population growth. After implementation in the early 1990s Colorado became one of the fastest growing states in the country.

TABOR’s rationale is quite simple and straightforward. Over time elected officials almost inevitably find it easier—for various reasons—to bend to the entreaties, or threats, of powerful interest groups to spend money that redounds to the benefit of these groups. Such interest groups represent sources of campaign financing and reliable voters on election day and whose wishes dare not be ignored. On the other hand, taxpayers are a disparate population with many allegiances and political views. Their broad interest in having government be as effective and low cost as possible is rarely the foremost concern of elected officials. Typically taxpayers as a whole do not march as an interest group or testify on spending measures or new programs. Then too, taxpayers are often conflicted because not only do they pay taxes they are members of interest groups that benefit from government largesse.

Taxpayers who do not work for government or who are not part of a favored interest group are at a disadvantage compared to the aggregation of special interests who tend to get what they want. This is especially true in an environment where strong public sector unions are present.

Greater economic prosperity in communities with TABOR is easy to understand. Businesses like a low tax environment. And they also like having the assurance that government spending will be constrained so that tax rates are not under continual threat of being raised. Government in a TABOR community must work hard to be lean and efficient including adopting cost saving measures such as outsourcing non-core functions. New programs requiring big spending increases are much less likely to get off the ground. Government instead is forced to focus on its core functions, something it should be doing without being forced. Finally, a very salutary result of TABOR is that government’s burden on taxpayers is far less likely to increase over time and can actually be lowered.

Politicians who fight voter approval of tax increases are saying, "trust us to do what is best." The problem is their track record is beyond deplorable and there is little or no taxpayer trust in them. Government exists for the benefit of all citizens including taxpayers and their input on momentous decisions is crucial. And while voter approval of every governmental decision is not possible or desirable, on the biggest decision of all—the amount of resources government will have to spend—voters should have the ultimate say.

No system is perfect nor can any system solve every problem or anticipate every adverse situation. But voter approval of taxes, accompanied by strict spending limits, offers a far better approach to fiscal matters than the irresponsible government behavior that has driven Pittsburgh into the financial ditch it finds itself stuck in.

So, Reverend Burgess is to be commended for proposing this first important step of referendum for tax hikes. It would be very positive for the future of the City and the way it is perceived by the business community if Council would approve the Reverend’s proposal and allow the citizens to vote on whether they want tax increases to be subject to referendum.

Surely, in light of the government’s litany of financial management failures, Council and the Mayor should grasp this opportunity to show a little humility and demonstrate some faith in the good sense of the people of Pittsburgh—and a lot less deference to political power players.

Jake Haulk, Ph.D., PresidentFrank Gamrat. Ph.D., Sr. ResearchAssoc.

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