Russel Norman
No place for TABOR in New Zealand

The Government has introduced a TABOR Bill to Parliament.  TABOR is an acronym for “Taxpayers’ Bill of Rights”.  But rather than have anything to do with a real Bill of Rights, TABOR is actually a wacky libertarian measure designed to shrink the state and inhibit its ability to protect the vulnerable or respond adequately to economic circumstances.

The essence of Rodney Hide’s Spending Cap (People’s Veto) Bill is to cap public spending at a calculated level, with increases in subsequent years’ public spending taking into account only inflation and population growth.  If a subsequent Government wanted to increase public spending by more than inflation and population growth, it would have to put the proposal to a referendum.

This Bill is as wrong as legislation can get.  For a start, it is constitutionally repugnant.  It would undermine the sovereignty of Parliament by constraining the Budget measures future Parliaments can pass.

From a practical point of view, it locks in the neo-liberal mantra of constraining Government expenditure during economic recession – a policy that failed in the 1990s and is failing again now.  And while governments could still run surpluses and save during the economic good times, there would be little point in doing so because they could not spend those savings to stimulate the economy when it heads south.

The US state of Colorado introduced TABOR in 1992.  An analysis by Iris J Lav and Erica Williams of the Center on Budget and Policy Priorities shows that in Colorado:

  • TABOR has contributed to declines in Colorado education funding
  • TABOR has played a major role in the significant cuts made in higher education funding
  • TABOR has led to drops in funding for Public Health programs
  • TABOR has hindered Colorado’s ability to address the lack of medical insurance coverage for many children and adults
  • TABOR’s interaction with other areas of the state’s budget has created additional problems. Spending for corrections, for example, has grown substantially faster than the inflation-plus-population formula of TABOR, in part due to strict criminal codes and sentencing laws. Because spending for corrections has grown rapidly, other areas of the budget have been squeezed even more in order to keep overall spending under the strict TABOR limit.

Treasury does not support Hide’s Bill, concluding in its Regulatory Impact Statement (PDF):

The Treasury does not support imposing constraints on the ability of the government to set fiscal strategy via hard parameters in legislation. A legislated spending rule, which a government did not wish to be bound by, could lead to efforts to circumvent the rule – potentially favouring certain types of decisions (e.g. tax expenditures or regulatory changes) and raising the risk of unintended or perverse outcomes.

My hope is that constitutional and economic wisdom will prevail and the National Party will abandon their support for the TABOR Bill.  My fear is that this Bill will carry over after the election, and if National and ACT together have the numbers to govern, this is the sort of idiotic voodoo-economic measure Don Brash just might make a bottom line in negotiations to form a government.

10 thoughts on “No place for TABOR in New Zealand

  1. From a practical point of view, it locks in the neo-liberal mantra of constraining Government expenditure during economic recession – a policy that failed in the 1990s and is failing again now.

    I don’t know, Russel. Some people’s ideology states that this isn’t failing and it never failed because… well… the result is the kind of outcome they’re perfectly comfortable living with.

    Spend a couple of hours walking around the streets of Manhatten during a New York winter and take a look at how many losers are shivering under thin blankets on the streets, and it’s fine because they’re balanced by the presence of incredibly rich people a few blocks away trying their hand on Wall Street or going to Broadway Musicals off Times Square. There are supermarket charities here and there that help out the homeless shelters, anyway.

    I think that’s just the kind of place some people want New Zealand to be, because it allows for those with the means to be it to be extraordinarily rich. Naturally you’d expect that a proportion of society will be living in squalid slums, because those people are losers and obviously some people have to lose so that winners can feel good about what they’ve achieved with their lives, or something like that. They can be swept under the rug.

    Like or Dislike: Thumb up 6 Thumb down 2 (+4)

  2. @Drakula 9:28 PM

    Libraries closed, people wallowing in shit due to lack of sewerage maintenance, rubbish uncollected on the grass berms, roads at gridlock because public transport unaffordable…

    Like or Dislike: Thumb up 3 Thumb down 1 (+2)

  3. I wouldn’t mind a TABOR that caps politician’s salary rises, the maximum price of government cars, defence spending, top bureaucrat’s salaries, perks and hospitality spending and the roading budget.

    Like or Dislike: Thumb up 2 Thumb down 0 (+2)

  4. Quite why Gareth et.al, consider the taxpayers pocket a bottomless pit to be continually raided in ever-increasing amounts is facination.

    All a TABOR does is draw a line in the sand (namely what it is now) and say “no more, unless you have a _very_ good reason the people agree with”. Quite why opponenst of a TABOR think that their reasons should trump other peoples reason is interesting.

    Why does Gareth et.al. urge restraint and sustainablility in fossil fuels, carbon emmissions, fertiliser useage, etc, but oppose restraint and sustainablility when it comes to the long suffering taxpayers pockets?

    Like or Dislike: Thumb up 1 Thumb down 2 (-1)

  5. I wouldn’t mind a TABOR that caps politician’s salary rises, the maximum price of government cars, defence spending, top bureaucrat’s salaries, perks and hospitality spending and the roading budget.

    I dunno, @Sam. Personally I’d go for more transparency and clear process at the political level before imposing across-the-board caps. Much (maybe not all) of what you’ve listed seems, to me at least, to be connected to the OIA black box that surrounds things like Parliament and MPs for no clear reason than to advance unaccountable privilege to the people who made the rules for others.

    Like or Dislike: Thumb up 1 Thumb down 0 (+1)

  6. Sams suggestion on “a TABOR that caps politician’s salary rises, the maximum price of government cars, defence spending, top bureaucrat’s salaries, perks and hospitality spending and the roading budget” could be explanded further to include limiting (or ideally not funding) political party propaganda election campaigns ….

    Like or Dislike: Thumb up 0 Thumb down 0 (0)

  7. Weird thing is the exclusions: “The following expenses are not specified expenses for the purposes of this Act:

    (a) unemployment benefits paid under the Social Security Act 1964:

    (b) borrowing expenses:

    (c) capital expenditure:

    (d) impairment losses:

    (e) emergency-related expenses.”

    So Rodney isn’t confident enough to cap unemployment spending, but will cap pensions? And doesn’t want to cap capital expenditure, so it won’t necessarily make government ‘smaller’. And since there’s just one cap that applies to most government spending, it seems there’s nothing to stop a government pushing a referendum to lift the cap by saying “we want to spend more on hospitals” then blowing the extra cash on BMWs.

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  8. Something that was noted the other day by I/S, having referenced Treasury comments in the Regulatory Impact Statement, was that it’s unlikely to be effective because the first government to find a problem with this cap will simply repeal it.

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