Cracks appear in antitax strongholds

Strapped for cash, some GOP governors rethink their stand on taxes.

This is a state in favor of small government, fiscal responsibility, and a tight control on spending.

Colorado's Taxpayers Bill of Rights - which places strict limits on how the state can draw revenue - is the mantra of antitax true believers everywhere.

So it's perhaps surprising that a proposal to let the state government keep the people's promised tax refund for the next five years is not only being floated, but doing fairly well in polls.

Even more surprising: One of the biggest proponents of that plan is the governor. Just a year ago, he was denouncing any such easing of the bill of rights, known as Tabor, and called it a tax hike.

Bill Owens isn't the only GOP governor to leave behind dearly held antitax ideals when faced with a particularly dire budget crunch. Mitch Daniels, who as President Bush's budget director earned a reputation for attacking government spending, proposed new taxes just eight days after becoming governor of Indiana. The governors of Alabama, Georgia, Idaho, Nevada, and Ohio have also changed course.

Depending on whom you talk to, the trend is either a sign of ideology giving way to pragmatism, or of Republican governors refusing to stand up to their ideals when they're put to the test.

"The fiscal straitjackets a lot of states have been in have the tendency to show the true colors of governors," says Stephen Slivinski, a budget analyst for the conservative Cato Institute.

But taxes, even from ardent conservatives, are sometimes necessary, others say. The idea that all taxes are bad at all times, or that any governor should take such a pre-inauguration pledge, "isn't public policy, it's demagoguery," says Iris Lav, deputy director of the Center on Budget and Policy Priorities, a Washington think tank.

"At the state level, raising taxes or not raising taxes has always been less party line than at the federal level," she adds. "It's not too surprising that even someone who'd been very pro-Tabor like Governor Owens looks and says, 'I'm a governor, my job is to make state government work,' and realize he has to do something."

Possible fallout

Some of the more conservative critics, however, warn that such actions will have political repercussions.

"Those Republican governors who raised taxes or tried to raise them will never move up in national office," says Grover Norquist, president of Americans for Tax Reform. "Mitch Daniels will never be vice president, not now. [Alabama Gov. Bob] Riley will never be vice president, not now. Owens - who was a presidential contender - will never be a candidate."

Mr. Slivinski of the Cato Institute says that many of the political switches on taxes come from second-term governors, who don't have a reelection campaign looming over them. Owens falls in that category, as does Gov. Kenny Guinn of Nevada, who waited until his second term to propose new taxes. He saw his grade on Cato's fiscal report card drop from an A during his first two years to an D on the most recent report card.

Owens received top marks for a second time, but the grade doesn't take into account his latest position on Tabor, says Slivinski. "Within about a week or two of us giving him another A, he announced a plan that's going to drop his grade," he says. "It's going on his permanent record."

Still, the pressure on governors can be intense. And the dilemmas over taxing, even for the most die-hard conservatives, aren't easy, often forcing governors to weigh ideology against cuts to vital state programs such as education and Medicare.

Take Colorado. The combination of Amendment 23, which mandates annual spending increases on K-12 education, and Tabor, which limits government spending to a formula of inflation plus population growth - has severely squeezed many other budget items, in particular higher education.

Owens has called his proposal - which would allow the government to spend beyond the limits and keep the refunds for the next five years - a way to save Tabor and insists it's not a tax increase.

He points to the extra burden Tabor's "ratcheting" effect has on state government: If revenue drops one year, during a downturn, the base for the next year's increases also drops.

"He's trying to fix that," says Sean Duffy, Owens's deputy chief of staff. Otherwise, "You're never able to recover from a recession."

A dangerous precedent?

But for those who see Colorado's strict limits as the ultimate of tax reform, the idea that it could be weakened seems like a dangerous precedent. At least a dozen other states, including Wisconsin, North Carolina, and Texas, are considering Tabors of their own, and its supporters are loath to see it questioned on its home turf.

"We have a governor who's changed horses," says Jon Caldara of the conservative Independence Institute in Golden, Colo. Mr. Caldara, like other Tabor advocates, credits its spending limits during good times with saving Colorado from huge deficits during lean times.

Others would like to see Colorado set aside money for a "Rainy Day Fund" - a safeguard for recessions that's part of some Tabors proposed in other states - rather than increase spending.

Coloradans themselves are often conflicted. Polling shows that majorities both like Tabor and want new spending on roads and schools, says Tom Clark, vice president of the Metro Denver Economic Development Corporation. He considers himself a fiscal conservative but admires Owens's willingness to change course.

"It's very easy to be ideological when everything's going your way. That's a hard lesson conservatives have learned," says Mr. Clark. "Governor Owens finally felt he wasn't elected to be Tabor's defender. He was elected to govern."

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