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Colorado taxpayers could lose $2.8 billion in TABOR refunds, according to new report

Report says over 100 pieces of legislation lawmakers passed this year will reduce TABOR refunds in the years ahead
TABOR refund check
Posted at 7:25 AM, May 22, 2024

DENVER — A new report shows Colorado taxpayers could lose billions in TABOR refunds if legislation lawmakers passed this year is signed into law.

The Common Sense Institute, which released the report, said more than 100 bills lawmakers passed this year could reduce TABOR refunds by a combined $2.8 billion over the next three years. That makes up about half of the $6 billion in projected TABOR refunds between 2024 and 2026.

Where is that $2.8 billion going?

Instead of being refunded to taxpayers, the report says the money will be redirected “towards targeted tax reductions for specific groups, mainly families and low-income Coloradans.” The report said the $2.8 billion is similar in size to the total amount refunded last year, which resulted in each taxpayer receiving an $800 payment.

TABOR, which was approved by voters in 1992, puts caps on the amount of tax revenue the state can keep year-to-year. The equation it uses is simple: revenue caps equal population growth plus inflation. In Colorado, that’s about 4 to 6% growth a year.

Once tax revenue hits that magic number, the state must give all the surplus revenue back to taxpayers. But lawmakers have a lot of leeway in how that money gets refunded.

In recent years, legislators have used tax rate reductions and tax credits as a way to refund the money as opposed to simply giving it all back to taxpayers through direct payments.

“The legislature has essentially substituted its decisions on how the money ought to be spent for the decisions of the individual taxpayers,” said Lang Sias, a former Colorado state legislator and the Mike A. Leprino Fellow at the Common Sense Institute.

Supporters of the tax credit bills lawmakers approved this year say the money will help those who need it most.

“These tax credits will cut child childhood poverty by more than 40%,” said Colorado House Speaker Julie McCluskie, D-Dillion. “We increased tax credits for hardworking Coloradans and families with children, putting hundreds of millions back into the pockets of the people feeling the brunt of the high cost of living in this state.”

But critics say whether lawmakers are using TABOR refund money for tax credits or tax reductions, it’s not what taxpayers had in mind when approving TABOR.

“They're essentially saying that the priorities that they have set are essentially more important than the priorities that individual taxpayers would've set,” said Sias.

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