Colorado has long suffered under the yoke of the unworkable, regressive monstrosity of the Taxpayer’s Bill of Rights.
Starting in tax year 2022, Colorado Democrats figured out the ultimate trump card to Douglas Bruce’s scheme to restrict spending on public education, roads, bridges, police, and fire departments all while requiring the wealthiest Coloradans to pay the exact same tax rate as the poorest.
Gov. Jared Polis and state lawmakers decided that TABOR refunds — the amount of money over Bruce’s revenue formula that must be given back to taxpayers — should go back to Coloradans on a per-taxpayer basis rather than through a formula that gives the money back to wealthier Coloradans first.
Democrats are going to do it again — with an estimated $2 billion in tax year 2023 — if voters agree to Proposition HH.
We love the not-so-subtle undermining of Douglas Bruce’s original intent to lock Colorado into a regressive tax system. Named the Colorado Cash Back by Polis in 2022, the policy makes Colorado’s tax system ever so slightly more progressive.
Polis and Democrats revived the TABOR fix for the 2023 tax year at the very end of the legislative session.
We do not love that lawmakers decided to make this good public policy conditional on voters approving another ballot measure — Proposition HH which will reduce both property taxes and the TABOR income tax refund simultaneously if voters say yes. Nor do we understand why they would only make it effective for a single year, when the property tax policy they are tying it to has a 10-year sunset.
In the next legislative session, starting January 2024, lawmakers should make it a priority to overhaul the TABOR refund mechanism, making the per-taxpayer flat refund permanent regardless of what happens with Proposition HH.
Polis told us the two are tied together because if HH fails there will be dramatically more money in the TABOR refund pot and lawmakers will want to develop a different policy based on the amount available. He mentioned the possibility of increasing the Earned Income Tax Credit — a policy we have long supported.
What we would not support is sending out $2.4 billion using the antiquated six-tier sales tax refund mechanism. Lawmakers would still have time in 2024 before tax day to correct this flawed mechanism if HH fails.
Under the flat mechanism every Colorado tax filer would get $661 (under current revenue projections) and filers who are married and filing jointly would receive double that — $1,331. That number could grow or shrink depending on the economy. The more money that goes out via a per-taxpayer lump sum, the more progressive it will make Colorado’s income tax, which right now is a flat rate of 4.4%. The lump sum refunds lower the effective tax rate for low-income Coloradans making it similar to the federal tax code with its seven income tax brackets.
With Proposition HH dedicating some of the TABOR excesses to increase school funding and the flat-refund policy, Democrats might have found the secret to breaking the TABOR stranglehold on this state. We’ll see what voters think of this proposal in November.
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