Gov. Jared Polis’ plan to offer relief to property taxpayers effectively guts refunds from the Taxpayer’s Bill of Rights by compounding the amount the state is allowed keep and spend each year, exponentially shrinking the money that Coloradans get and potentially eliminating it altogether at some point, according to critics of the proposal. 

Critics charged that Senate Bill 303 is the Democrats’ “backdoor” attempt to siphon off TABOR refunds away from people’s pockets and funnel them into the majority party’s spending priorities – without expressly telling the public precisely because the checks are politically popular among Coloradans.

Such rhetoric of vanishing TABOR refunds, supporters of the plan countered, is “off the hook.”

Voters will have the opportunity to reject or approve the proposal in November. Already, battle lines are forming and both sides have begun to pitch narratives that will likely play out during the campaign.

Critics recently formed a coalition to fight the proposal, promising an “aggressive effort” that includes paid advertisements. Supporters are also expected to form a “yes” campaign.

Polis and Democrats argued that the property tax plan offers tangible respite to Coloradans facing soaring valuations in property taxes, which, in some areas, rose as high as 50%.

The governor said under the proposal, the average homeowner would save more than $1,000 over the next two years and roughly $3,500 over the next five years, while a business with $1 million in property value would see $4,300 in relief over the next two years and about $12,400 over the next five years.

They also seek to curb property tax hikes by also enacting legislation to equalize TABOR refunds at $661 per person or $1,322 for joint filers, a one-time change from the current system that bases the TABOR refund on income levels. But the measure would not take effect if voters do not approve what will be known as Proposition HH, which implements the provisions of SB 303.

Critics describe the plan as a sleight of hand – taking money already owed to people and then calling it tax relief.  

“It takes $10 billion from TABOR refunds over the next 10 years and makes it unlikely that Coloradans get TABOR refunds at all in the long run,” said Michael Fields, a conservative activist spearheading a lawsuit against Senate Bill 303.

The lawsuit, filed in Denver District Court this month, claims the legislation violates the constitution’s single subject rule, arguing it has four subjects instead of one: it reduces property tax assessment rates; asks voters so the state can retain and use the funds for other expenditures, notably on the “politically appealing” subject of education; allocates money for tenant rent; and, it permanently changes – and “eventually eliminates” – TABOR refunds.

That last claim arose of Senate Bill 303’s Section 3, which raises what’s called the Referendum C cap by 1% and keeps that additional revenue for a 10-year period, generating about $167 million in the first year, which, in turn, would be funneled to local governments to hold them harmless from reductions in property tax revenue.

Approved by voters in 2005, the Ref C cap allowed the state to retain and spend all revenue collected between FY 2005-06 and FY 2009-10. Afterwards, it permits the state to retain and spend all revenue collected up to the cap, which grows annually by inflation plus population growth. Surplus revenue in excess of the cap is then refunded to Colorado taxpayers.

Critics said SB 303 also increases the cap by 1 percentage point each year for the next nine years.

Ben Murrey, who serves as Independence Institute’s director of fiscal policy, said that, under the governor’s plan, taxpayer refunds “will go away entirely.”

“By year 5, you’re giving up over $1B/year,” he said in a tweet. “By year 10, it’s over $2B.”

Fields said this means if Coloradans were to continue receiving TABOR refunds in the long run, the state’s revenue growth would have to outpace inflation plus population – plus 10% every year.

That, he said, “would never happen.”

A forecast by legislative analysts says under the plan, TABOR refunds would decrease by $167 million in fiscal year 2023-24 and by $358.6 million in the next year. Analysts did not provide an estimate for the out years, but they noted, in a separate forecast, a predictably more stable economic outlook in the next few years.

Scott Wasserman, president of the Bell Policy Center, which advocated for SB 303’s passage, did not dispute a scenario under which rebates won’t land in Coloradans’ mail boxes, such as in a recessionary economy when the revenue dips below the cap.

But there’s a lot of unknown about future TABOR surpluses, he said. 

“Because all of this is based on the economy,” Wasserman told Colorado Politics, “we have no way of knowing if we’ll be above or below the TABOR cap 10 years from now. We also don’t know how large surpluses will be.”

“Five years ago, I would have dismissed the idea that we’d be looking at $2 billion plus surpluses. Today, that’s being taken for granted and treated likes it’s a given,” he said.

And the rebates, he said, “have never been a given.”

“In fact, they’re a pretty recent phenomenon. We’ve had a great many years under the existing cap in which none occurred,” he said.

Wasserman also raised another point: Under a recessionary scenario, that one percentage point increase in the cap would look a lot different than in a growing economy. 

“That’s why,” he said, “I don’t think we should assume year over year compounding like you’re describing with that 10% figure. Over the next 10 years, we’ll definitely see at least one recession, and that will change what 1% of the previous year’s spending means.”

Wasserman said from 2000 to 2010, the country had two recessions, one small and one big, significantly altering states’ spending and revenues.

Wasserman also pushed back at the points raised by Fields and Murrey.  

“The rhetoric on the conservative side is off the hook,” he said. “Rebates are not disappearing any time soon, if at all. In fact, many people will be seeing property tax relief AND TABOR rebate checks.”

Fields agreed that actual revenue could go up or down in future years.

“So, it’s impossible to say when it will totally eat it up,” Fields said, referring to worries that SB 303’s cap would swallow TABOR refunds. “But it is certain that it will eat it up at some point.”