Many Americans believe that the states have a spending problem. But are the formal tax and expenditure limits (TELs) that many states use to restrict spending effective? At an AEI event on Wednesday, economists and policy elites joined AEI's Benjamin Zycher to discuss the impact of these measures on state spending.
Zycher highlighted the results of his most recent paper, which found that TELs are rarely an effective tool for limiting state spending despite their national popularity. Zycher noted that TELs do not address any of the fundamental causes of government growth. He instead called for a renewed emphasis on federalism and a return to the basic principles of limited government.
Michael New of the Cato Institute suggested that TELs may be effective if they are designed properly. He pointed to the Colorado Taxpayer Bill of Rights as a TEL that helped to significantly rein in spending.
Nicholas Johnson of the Center on Budget and Policy Priorities agreed with Zycher's conclusions that TELs are ineffective, but rejected the assumption that states have an underlying spending problem that needs to be controlled. Matthew Mitchell of the Mercatus Center concluded that states may be better off pursuing balanced budget amendments and other institutional changes as mechanisms to help control spending.
For many years, US states and localities have confronted pressures for ever-greater spending. In pursuit of enhanced fiscal discipline, 30 states since 1978 have enacted formal limitations on taxes, budgets, or outlays. Current fiscal pressures, driven largely by pension and health care costs, have renewed policymakers’ interest in such tax and expenditure limits (TELs).
Despite the substantial time, resources, and effort that have been devoted to the enactment of TELs, new research conducted by AEI’s Benjamin Zycher finds that the fiscal outcomes stemming from such tools have largely failed to live up to their promises.
Exactly how effective have TELs been in constraining state and local spending, and how can state and local officials curb budget growth more effectively? Why have TELs failed to live up to their expectations? And what lessons might these findings hold for policymakers at the national level?
Join Zycher and a panel of TELs experts to discuss the local and national implications of this new research.
If you are unable to attend, we welcome you to watch the event live on this page. Full video will be posted within 24 hours.