IP-10-1994 (September 1994)
Author: Robert G. Natelson

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Executive Summary:

• This November, Montana voters will consider two proposals to place Tax- Expenditure Limitations (TELs) in the state constitution.
• There is a clear inverse correlation between level of state and local government revenue and comparative economic growth. From 1969 through 1984, for example, Montana state and local government revenue rose sharply, both in absolute terms and as a percentage of income. Montana’s economic performance began to lag the nation a few years after this period began, and continued to lag until a few years after this period ended.
• From 1985 through 1991, the growth of government revenue was more restrained. Toward the end of this period, Montana personal income growth again began to outpace the rest of the nation.
• Recent legislative efforts to revive the high-spending, high-tax policies of the 1970s and early 1980s have prompted Montana citizens to propose two constitutional initiatives to control government;s fiscal appetite. Constitutional Initiative 66 would require public approval of tax increases. Constitutional Initiative 67 would require legislative super majorities for increases in taxes, fees, or spending.
• Over half of the states already have some form of tax-expenditure limitation.
• Opponents of tax and spending controls claim that Montana is “different” economically from the rest of the nation and requires a higher level of government. Careful examination reveals little support for this claim.
• The experience of other states shows that TELs that are not drafted carefully may prove ineffective or counterproductive. The author subject both CI-66 and CI-67 to a 10-item test to gauge their likely effectiveness.
• Although both measures have various advantages and disadvantages, CI-66 likely would be more effective in practice. CI-66 and CI-67 are not legally inconsistent.