A Torrent of Litigation: Why Taxpayer Protections Are in Danger Throughout the Country

Date: March 19, 2014

In 1992 the people of Colorado voted to amend their Constitution with adoption of a Taxpayer Bill of Rights (TABOR). This was a historic initiative that put the power in the hands of the people to decide for themselves whether to approve new taxes or tax-hikes. While many states have constitutional protections to prevent new or increased taxes—such as California’s requirement of a super-majority vote in the legislature—Colorado’s TABOR was unique in that it made the citizens of the state the final word on new taxes or increased taxes. TABOR therein served as a model that has been implemented through constitutional amendments in other states, and which NFIB has supported as a means of protecting small business owners from new and ingenious taxing schemes. But TABOR is under attack—and this may have profound implications, not only in Colorado but throughout the country.

TABOR was upheld as constitutional in the Colorado Supreme Court last year in the face of a lawsuit advanced by educators and the parents of school-aged children who complained that TABOR makes it harder for schools to get necessary funding. NFIB Small Business Legal Center filed in that case to defend the law, and we were pleased to see the Court ultimately affirm the constitutionality of TABOR. But TABOR faces yet another challenge—this time in federal court.

Now in Kerr v. Hickenlooper, a group of politically motivated legislators complain that they would like to be able to raise taxes, or to enact new taxes, but that TABOR has taken away the legislature’s power to do so. But this case is even more troubling than the first because the argument would set a dangerous precedent if accepted. As the NFIB Legal Center argued in an amicus filing to the federal court of appeal for the Tenth Circuit, a decision striking TABOR down would create legal authority to bring similar lawsuits in other states. In other words, the case will have major ramifications not only in Colorado, but throughout the country. As NFIB Legal Center attorney Luke Wake explains on the NFIB Blog, this would literally open the floodgates for lawsuits challenging taxpayer restrictions in all 50 states.

Unfortunately the Kerr lawsuit has survived a motion dismiss thus far. Just last week the Tenth Circuit held that the case could move forward. This in itself opens a channel of attack for litigants who would like to get rid of taxpayer protections like California’s requirement that new taxes must be approved by a supermajority vote in the Legislature, or North Carolina’s requirement that the Legislature must balance its budget. And since over-taxation is already a concern for small business, NFIB Legal Center is very concerned about the implications of the Kerr opinion. But, this is all the more reason for us to step-up our fight to defend TABOR and the right of the citizens of any State to enact taxpayer protections.

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