CLARKONOMICS: State tax collections are now above their all-time record high five years ago, according to new numbers from the Nelson Rockefeller Institute of Government. So where is the money going?

While increased tax collections are a sign of economic recovery, I think this whole question poses a fundamental challenge for our nation's future. This is what I like to call our country's 'Colorado moment.'

Colorado has done just about the best job of controlling the growth of state government through its Taxpayers' Bill of Rights (TABOR). The idea behind TABOR is that state spending must be capped at the rate of population growth plus the rate of inflation. Very often, TABOR require Constitutional approval in some states, while other states can enact it by legislation (which admittedly can be later undone).

The whole idea behind TABOR is that bureaucracy unchecked will grow, and politicians are wont to kick problems down the road. Over time, that approach increases the obligations of a state and the cost for running that state.

TABOR is not an unchallenged straightjacket of spending though; a super majority vote of a state legislature could override the TABOR cap in crisis situations so you're not left without any safety valve or safety release.

We're at a point where, with all the rhetoric about controlling spending, so many office holders get in there and get amnesia about their campaign promises -- regardless of party affiliation. That's the reality.

The beauty of TABOR is that if you impose a cap on growth in state spending, you change the future economic equation in that state and create a more competitive environment. Maybe you can even get to the point where you eliminate state income tax, which is one of the most effective ways to lead to economic growth.

Editor's note: This segment originally aired April 30, 2012.

Image of Clark Howard About the author: Clark Howard

Clark Howard is a consumer expert whose goal is to help you keep more of the money you make. His national radio show and website show you ways to put more money in your pocket, with advice you can trust. View More Articles

Show Comments 0