The Colorado legislature just voted for the largest tax increase in Colorado’s history. As you suspect they are framing this as a tax increase “without increasing taxes”. Essentially the new ballot initiative will allow the state to eliminate the taxpayer bill or rights and grant themselves unlimited spending under the guise of education. What is the new shell game in the legislature? What does this mean for your taxes? How will businesses react?
What is Colorado’s Taxpayer Bill of Rights (TABOR)?
Before talking about the new initiative, it is important to discuss the taxpayer bill of rights. Colorado’s 1992 Taxpayer Bill of Rights (aka TABOR) limits annual spending growth to the rate of population growth plus inflation. If tax revenue exceeds this cap, as often happens when the economy is strong, the surplus is returned to taxpayers. Refunds have averaged about $700 to $800 per household in recent years.
The cap imposes spending discipline on lawmakers and prevents boom-bust revenue cycles—that is, when years of strong economic growth and tax collections give way to downturns and deficits. Government unions pushed to undermine the spending and tax limits with ballot measures in 2019 and 2023. Both failed.
The new end run to eliminate Tabor
Under the guise of increased education spending, the Democratic measure would lift the spending cap by effectively removing education spending from the general budget. This would raise the limit by $4.6 billion this year and allow the state to keep up to $37.5 billion more in tax revenue over the next decade. Say goodbye to your annual refund alog with any spending discipline imposed by TABOR
Democrats say the measure would raise money for education without raising taxes. As anyone with half a brain knows, money doesn’t grow on trees and this new initiative will increase taxes.
Eliminating taxpayers’ refund is an effective tax increase. Plus, the measure would embolden Democrats to raise even more taxes since they wouldn’t have to return the resulting revenue that exceeds the cap to taxpayers. They could keep and spend it.
Is additional money for Colorado education really needed?
I have two school age kids so I am very sensitive about education. With that said, where I live in Colorado, about 5 years ago the board of education commissioned a study showing that we needed a new middle and elementary school because of a predicted growth in school age population. Unfortunately the study basically said what the board wanted it to say even though anyone with half a brain could see the changing demographics which were skewing older with less kids. Fast forward, the school board spent 30 million on a new school and close to a million a year on new principles, buses, etc… all for this new school. Guess what, we now have a declining school population and a school that has around a 50% utilization.
The same is true for Denver, the largest district in the state, with a huge loss in school age population and yet they have only closed a handful of schools due to political winds. Denver in reality could be saving millions a year on spending by closing closer to 50 or 75 schools to balance resources with demand.
Unfortunately the real issue for the education shortfall is improper management and allocation of resources. The democrats solution is to just give more money in order to sweep common sense reforms/decisions under the rug.
Education initiative eliminates Tabor
It is important to look at other states as a roadmap for where Colorado is heading. We can look no further than California which our legislatures are using as a roadmap. Without Tabor look for runaway tax increases for every single pet project. Remember that Tabor imposed fiscal discipline that taxes cannot grow faster than population growth and inflation. This should give the legislature plenty of room with taxes already increasing annually, but instead we are seeing increased spending on every single pet project from housing, basically free busses to the ski areas (subsidized bustang), out of control spending on medicare, etc…
Businesses already leaving and more will follow
Tabor gave many businesses comfort that Colorado would not turn into California with out of control spending. Unfortunately with the elimination of Tabor, many businesses will take Colorado off their list as the cost of doing business in the state far outweighs the tax burden and risk of huge future tax increases.
Will voters fall for the new ploy to eliminate Tabor
Voters historically have favored keeping Tabor, but times have changed. Over the last four years The front range has skewed even further left which makes me believe that this initiative is basically a coin toss in November.
Eliminating Tabor is bad for the state
Regardless of your political affiliation, I think most would agree that having fiscal discipline is a good thing. By having spending guardrails it forces our legislature to make tough decisions on priorities just like everyone reading this article does every day. When you go to the grocery store, I doubt most reading this eat fresh lobster every night even if it is their favorite meal as it is expensive and choices must be made whether to have lobster every night, pay a mortgage, pay for kids college, etc… Although it would be nice to have unlimited money, having a budget forces all of us to prioritize the important items.
Unfortunately with the new initiative to eliminate Tabor, our legislature gets a free lunch of 37.5 billion over the next decade to spend on whatever they please. As we have seen already, unlimited money delays tough choices like keeping hundreds of schools open that should be shut due to low enrollment. I hope voters see through this legislative BS to supposedly increase education spending without raising taxes.
Additional Reading/Resources:
- https://www.wsj.com/opinion/colorado-tabor-tax-increases-spending-democrats-2dd52ff7?mod=opinion_trendingnow_article_pos4
- https://coloradohardmoney.com/denver-surpasses-tampa-with-fastest-falling-prices-is-the-sky-falling/
- https://coloradohardmoney.com/why-are-colorado-property-taxes-rising/
- https://coloradohardmoney.com/colorado-eliminates-private-property-insurance/
