May 6, 2024 - Politics

How Colorado issues TABOR refunds is changing significantly

A stacked column chart showing expected TABOR refunds and reductions under SB 24-228 for the 2023 though 2025 fiscal years. The total savings would be $1.8k for 2023 and increase to $2.3k by 2025.
Data: Legislative Council; Chart: Axios Visuals

How much you will get in future taxpayer refunds is dramatically changing.

State of play: Gov. Jared Polis and bipartisan lawmakers are advancing a bill to refund excess state revenue through two new methods, which are dependent on the total rebate amount in the next 10 years.

  • The first is a temporary income tax reduction, and the second is a cut in the state sales tax rate. Democrats say this method is more timely than rebate checks at tax filing.
  • The current method, a sales tax refund based on income at tax filing, would come into play only in years with huge sums of excess revenue.

Why it matters: The Democratic shift in how Taxpayer's Bill of Rights refunds are issued is the most significant overhaul in recent years and gives the governor a conditional win on his long-standing promise to lower the state's income tax.

Context: TABOR, a constitutional amendment revered by conservatives, caps state tax collections at the rate of inflation and population growth. But it allows lawmakers to adjust the method of refunds.

  • The state is forecast to refund $1.8 billion at tax filing next year, $1.9 billion the year after and $2.3 billion in 2027.

Yes, but: Two other major tax credits being pushed by Democrats threaten the future of TABOR refunds.

The intrigue: An income tax cut in the TABOR bill overwhelmingly benefits the wealthy — and runs counter to efforts by Democratic lawmakers, but earlier this year, Polis issued an ultimatum to lawmakers that a reduction be part of any adjustments to TABOR.

Between the lines: The new TABOR refund mechanisms are contingent on support from the IRS, which is studying whether the rebates amount to taxable income.

What they are saying: "When we have an opportunity to cut taxes that's something that [residents] want us to do," Sen. Kyle Mullica (D-Northglenn) told Axios.


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