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February 2012 Policy Study, Number 12-2


TABOR: A Pro-Growth Solution for Iowa

by John Hendrickson



Executive Summary



Across the nation Governors and state Legislators are confronted with the task of implementing sound economic policies that will create both jobs and attract businesses. The difficulty of this responsibility has increased in the aftermath of the “Great Recession” when unemployment remains high and states, just as with the federal government, face tremendous fiscal challenges. Many states across the nation have led the way in restoring pro-growth economic policies that consist of tax reform, reduced spending, and reforming state government. These are the policies that are needed in order for economic growth to take place. The policy of both low taxation and spending is a blueprint for economic success.


In examining specific pro-growth economic policies, policymakers in Iowa should consider a Taxpayers Bill of Rights measure or TABOR. Colorado was the first state to implement a TABOR provision. The TABOR provision was adopted by Colorado voters in 1992 in response to high levels of taxation and spending. The purpose of TABOR was to bring spending and taxes under control by requiring voter approval of spending and tax increases. Under TABOR state spending is slowed by population growth and inflation and it brought more accountability to government. Although voters have reformed TABOR, the measure has provided not only the most aggressive tax and spending limitation measure, but it led to economic growth.


Colorado’s TABOR provision was passed by a citizen initiative and Iowa currently does not have the initiative or referendum. Policymakers could implement a TABOR provision by passing an amendment to Iowa’s Constitution — the same process is under way in regard to defending the traditional institution of marriage. A TABOR provision in Iowa would not only provide more accountability to government, but taxpayers would be able to decide whether or not to agree with tax and spending increases.


As Iowa struggles with budget and tax reform, policymakers should consider the possibility of a TABOR provision. Other pro-growth measures can be implemented as well such as priority-based budgeting, tax reform, and reforming state government by eliminating unnecessary regulations and implementing free-market reforms. Several states are currently pushing for significant tax and spending reforms.


States not only have to compete in a global economy, but also with each other. The states that have low tax rates, sound fiscal and budget policies, and reasonable regulations will be the main attraction for business growth and job creation. Policies such as TABOR and other pro-growth tax and fiscal policies need to be seriously considered by policymakers in Iowa. Historically whether on a state or national level
limited-government policies have proven to work. Implementing these policies will be a challenge as demonstrated by the debates taking place in other states such as Ohio and Wisconsin. In the end this debate is largely about two philosophies of government.




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