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Colorado Voters Could End TABOR Refunds

July 9, 2019

The state’s Taxpayer’s Bill of Rights (TABOR) requires the state and local governments to refund excess revenues to residents.

Colorado voters will decide whether to suspend a provision of the state’s Taxpayer’s Bill of Rights (TABOR) that requires the state government to refund excess revenues to residents, in this November’s general election.

TABOR, added to the state constitution in 1992, requires voter approval of tax increases, limits increases in government spending to inflation plus population growth, and forces officials to refund excess revenues to the taxpayers.

Colorado is the only state with such a strong limit on increases in spending. Over the decades, officials have returned more than $3 billion to business and individual taxpayers.

Gov. Jared Polis (D) signed into law H.B. 1257, which puts the proposition on the fall ballot, and H.B. 1258, which would allocate the additional revenue to education and transportation programs if voters approve the referendum, on June 3. H.B. 1257 received the needed majority approval in both houses of the Colorado General Assembly, including all the votes cast by Democrats plus one from a Republican state Senator.

Funds Could Be Diverted

The state government is just trying to take away more money that belongs to taxpayers, says Rep. Kim Ransom (R-Littleton).

“These are refunds that the taxpayers are entitled to,” Ransom said. “We do not have an income problem. We have a spending problem.”

The additional funds could be diverted and may not materialize at all, says Michael Fields, executive director of Colorado Rising Action, which advocates for limited government.

“There is no guarantee where the money will go in the future,” Fields said. “There is also no guarantee how much money will be there to use each year—or if any will be there at all.”

‘Might Be No Refunds’

The tax refund for 2020, projected to be $65 million, depends on revenues made possible by energy production that the state may not receive because of new restrictions on resource development, says Fields.

“With the new oil and gas regulations, our economy might be slowed, which means there might be no refunds at all,” Fields said.

Ended ‘Economic Stagnation’

Colorado’s tax and spending limit has had a positive effect on private-sector growth, says Jennifer Schubert-Akin, CEO of the Steamboat Institute.

“TABOR helped end years of economic stagnation and laid the groundwork for the state’s future success by keeping resources in the hands of Colorado residents who could put them to their highest valued use and [by] checking overzealous government spending,” Schubert-Akin said.

“Its requirement that excess revenues must be refunded to taxpayers has resulted in more than $2 billion being returned to the private economy to be spent at local businesses or saved for retirement,” Schubert-Akin said. “H.B. 1257 threatens to eliminate this vital requirement that excess revenues be returned to those who produced them.”

TABOR refunds to citizens have been made through property tax breaks for seniors and veterans and through temporary income tax rate reductions.

Not the First Time

Colorado lawmakers previously have found ways around TABOR, such as instituting fees that funnel tax money into additional government spending. In 2005, voters passed Referendum C, which suspended the refunds for five years and directed the money to transportation and health care spending. H.B. 1257 would permanently divert all excess revenues.

It is doubtful the additional spending would improve education or transportation, says Schubert-Akin.

“Education and transportation cannot plan for this money year-to-year,” Fields said. “We can't bond for roads off of refund money, and education can't build it into their budgets.

“The bill is intended to create better roads and schools, but it's unlikely to achieve these goals,” Schubert-Akin said. “What’s sure, though, is that H.B. 1257 will take money out of residents’ pocketbooks, hurting their personal finances and the state's economy.”

Owen Macaulay (omacaulay@hillsdale.edu) writes from Hillsdale, Michigan.

Author
Owen Macaulay writes from Hillsdale, Michigan.
omacaulay@hillsdale.edu