Federal Court Dismisses Lawsuit to Cut Voters Out of Tax Decisions

December 17, 2021 Updated: December 22, 2021

Commentary

After more than 10 years of legal proceedings, a federal appeals court has dismissed a lawsuit that would have banned popular votes on tax measures (pdf).

Here’s the background:

In the decades after independence, state constitutions generally allowed legislatures to tax, spend, and borrow at will. Lawmakers vastly overextended themselves, and in the 1840s, five states defaulted on their debt—effectively declaring bankruptcy. Several others came close to doing so (pdf).

In response, state constitutions were amended to rein in the fiscal powers of state legislatures. Lawmakers were required to balance their budgets. Certain taxes, or taxes over a certain amount, were prohibited. Special procedures were required before taxes, spending, or debt could be increased (pdf).

Scholars call such restrictions “tax and expenditure limitations” or “TELs.”

Because most modern “progressives” favor virtually unlimited government, most of them hate TELs. “Progressive” officials and activists wage incessant war against TELs. They find ways to circumvent them. They bring lawsuits and persuade liberal judges to limit or void them.

As a result, TELs weaken over time and must be renewed or rewritten every few years.

Colorado’s Taxpayer’s Bill of Rights

The nation’s most widely known TEL (at least after California’s Proposition 13) is Colorado’s Taxpayer’s Bill of Rights, or TABOR (pdf). TABOR imposes several fiscal restrictions. Most famously, it requires public votes on some (not all) proposals to hike taxes, spending, or debt. In other words, TABOR subjects certain legislative financial decisions to mandatory referenda.

Colorado’s voters added the Taxpayer’s Bill of Rights to the state constitution in 1992. Opponents claimed TABOR would destroy the state, but exactly the opposite happened. Colorado emerged from an economic recession to become one of the richest and most prosperous states. Prosperity swelled the tax base, so Colorado state and local governments have been awash in revenue.

Colorado’s experience was consistent with the findings of many—inadequately publicized—research studies: Reducing government’s share of the economy stimulates economic growth; increasing government’s share of the economy retards economic growth.

Yet the “progressive” Third World mentality prefers that government commands a huge share of a meager pie than a moderate share of a larger pie.

Like other TELs, the Taxpayer’s Bill of Rights is under constant assault. Legislative bodies and judges have lacerated it and circumvented it. Many of its protections are now gone.

In 2011, a coven of special interests asked a federal court to kill the rest of TABOR. They claimed that TABOR prevented Colorado from having a “Republican Form of Government,” as required by the U.S. Constitution’s guarantee clause (Article IV, Section 4) and the Colorado Enabling Act (the congressional measure admitting Colorado to the Union). The plaintiffs claimed that for a state to be “republican,” the legislature must have absolute power over finance.

The Lawsuit’s Bizarre Foundations

The court should have dismissed this lawsuit immediately. First, few, if any, of the plaintiffs had legal standing to bring it. Second, the Supreme Court has long ruled that “republican form of government” cases are for Congress to decide, not the judiciary. Third, the Supreme Court respects initiative and referendum procedures. Fourth, TELs are a longstanding fixture of most state constitutions. The plaintiffs offered no explanation why other TELs are valid but TABOR is not. Fifth, claiming the U.S. Constitution doesn’t permit restrictions on legislative fiscal powers is absurd because that very document restricts legislative fiscal powers (pdf).

Finally, the lawsuit’s central allegation—that popular votes over public finance violate the “republican form”—is demonstrably false.

The ‘Republic Versus Democracy’ Dichotomy

The foundation of the plaintiffs’ complaint was that there’s a sharp distinction between a “republic” and a “democracy.” The plaintiffs argued that allowing the people to check the legislature’s fiscal powers converted Colorado into a democracy, and a democracy can’t be a republic.

The distinction between “republic” and “democracy” is a common one. But for constitutional purposes, it doesn’t exist (pdf). On the contrary, when the Constitution was adopted, the two words meant much the same thing, and leading Founders employed them interchangeably.

The “republic versus democracy” dichotomy was invented decades after the Constitution was ratified—also in the 1840s. A dispute arose between two rival groups, each claiming to be the legitimate government of the state of Rhode Island. Lawyers for one rival government argued that the other rival government was too democratic to be republican.

They based their argument on remarks by James Madison in “The Federalist,” but they took those remarks out of context. They also ignored what Madison said elsewhere and what many other Founders had said. In fact, the only kind of democracy the Founders considered “unrepublican” was a construct that Aristotle had called “teleutaia demokratia“—absolute, ultimate, or “pure” democracy. This was a hypothetical state with no officials and where lawless mobs administered everything. Perhaps modern Portland, Oregon, fits this definition, but clearly, Colorado does not.

Despite its lack of factual basis, the “republic versus democracy” canard proved durable. In the late 19th century, opponents of direct democracy (initiative and referendum) resurrected it. They maintained that allowing the people to vote on laws or taxes turned states into “democracies” and made them unrepublican. This was a ridiculous argument because before the 19th century, nearly all republics featured institutions of direct democracy. One example was the Roman Republic, the longest-lived republic in history (509–27 B.C.E.).

Indeed, before our Constitution was adopted, purely representative lawmaking usually was associated with limited monarchies, not with republics. Yet the canard survives today, and “progressives” deploy it when convenient.

The Case That Would Not Die

As baseless as the anti-TABOR lawsuit was, we at Colorado’s Independence Institute took it very seriously. We anticipated that unscrupulous liberal jurists might seize on it as a way to destroy TABOR. If this happened, TELs in almost every other state would be at risk (pdf).

Our concern was justified. The case came to exemplify how the left wastes judicial resources in political battles.

The plaintiffs filed in Colorado’s U.S. District Court. After initial proceedings, the case went to the U.S. Court of Appeals for the 10th Circuit in Denver. Then, it was appealed to the Supreme Court. The Supreme Court sent it back to the Court of Appeals. The Court of Appeals remanded it to the District Court. The District Court’s decision was appealed to a three-judge panel of the Court of Appeals. Finally, that panel’s decision was reviewed by all nine judges of the Court of Appeals (en banc).

Three years into this history, the future Justice Neil Gorsuch, then serving on the Court of Appeals, highlighted the weaknesses in the plaintiffs’ case and urged his colleagues to dismiss it (pdf). But they didn’t.

However, on Dec. 13, 2021, the Court of Appeals finally took Gorsuch’s advice. Various judges hearing the case already had decided that most of the plaintiffs had no standing. Now, the Court of Appeals ruled that the only remaining plaintiffs—local governments—couldn’t claim the protection of the guarantee clause or Colorado’s enabling act.

Technically, the Court of Appeals dismissed the lawsuit “without prejudice,” meaning that the plaintiffs can bring it again. But as Chief Judge Timothy M. Tymkovich pointed out in his concurring opinion, the decision’s practical effect is to bar the plaintiffs from doing so.

Citizens in both Colorado and other states can breathe more easily: This particular threat to popular governance is over.

Robert G. Natelson, a former constitutional law professor who is senior fellow in constitutional jurisprudence at the Independence Institute in Denver, authored “The Original Constitution: What It Actually Said and Meant” (3rd ed., 2015). In the litigation discussed in this essay, both Justice Gorsuch and Judge Tymkovich cited professor Natelson’s published research on the guarantee clause (pdf).

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.

Rob Natelson
Robert G. Natelson, a former constitutional law professor, is senior fellow in constitutional jurisprudence at the Independence Institute in Denver.