Our state government is required under Colorado’s constitution to refund excess tax revenue. Any year-to-year increases in collections above the rates of inflation and population growth combined must be returned to the public. Hence, taxpayers’ “TABOR refunds.”

When it comes to the actual process for returning the money, however, there’s a lot of wiggle room. Too much.

Exhibit A is a package of bills adopted near the end of the 2024 legislative session earlier this month. As we noted here then, the legislation hijacks Coloradans’ TABOR refunds, doling them out through a combination of temporary tax cuts and credits. It further complicates a refund mechanism that already was complicated enough thanks to previous legislative tinkering.

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The upshot, as we observed, is that ruling Democrats at the Legislature are redistributing this year’s $2 billion TABOR surplus as they see fit. Rather than return all the money to the general taxpaying public, they’re doling out a significant portion of it to those they deem most needy or deserving.

Most notably, about $700 million of the pending surplus is projected to go to low-income Coloradans through an expanded earned-income tax credit and a new “family-affordability” tax credit. That’s hardly fair to the rest of the taxpayers who helped generate that revenue. It’s also unfair to the beneficiaries themselves because they’ll come to rely on it — yet will suddenly find themselves without it in the next economic downturn, when there’s no surplus to fund it.

Now, Colorado’s Common Sense Institute has shed more light on the subject. Its latest report, released last week, tallies the full toll that the package of tax credits could take on Coloradans’ TABOR refunds over the next few years.

Common Sense analyzed 101 bills passed during the 2024 legislative session that, if signed by Gov. Jared Polis, will cut TABOR refunds by a combined $2.8 billion over the next three years. That’s nearly half the $6 billion total in TABOR surpluses projected for those years. Just two of the bills — creating the family-affordability tax credit and expanding the earned-income tax credit — will account for $1.8 billion of the reduction in TABOR refunds over three years.

Another portion of the TABOR surpluses in coming years will be refunded in advance, so to speak, through a temporary cut in the state income tax. As far as it goes, that’s a welcome piece of the overall legislative package that drew substantial bipartisan support. A tax cut, in principle, is always good for the economy as well as for individual taxpayers.

Yet, like the tax credits, the income tax cut is pegged to TABOR surpluses. Without a surplus, the tax cut disappears. Worse still, it won’t kick in unless the surplus tops $300 million. The rate of the cut would vary, depending on the amount by which the surplus exceeds that threshold in any year. This year, the income tax rate will drop to 4.25% from its current 4.4%

Fundamentally, all these elaborate and roundabout mechanisms purporting to refund TABOR surpluses serve to further estrange taxpayers from money that’s rightfully theirs. It estranges them, as well, from the constitutional amendment adopted by voters in 1992 — the Taxpayer’s Bill of Rights, TABOR’s namesake — that made the refunds possible in the first place.

As the Common Sense report puts it, the legislation, “undermines TABOR’s intent by divorcing taxpayers’ contributions to state revenue from the values of refunds they receive and deciding for them how that money should be spent.”

TABOR’s original premise was that the taxpayers know best how to spend their own money. Given the current crop of free-spending, government-growing lawmakers, TABOR’s premise is truer now than ever.

Denver Gazette Editorial Board