Hooray! Thanks to Colorado’s unique Taxpayer Bill of Rights, we’re all getting a tax refund! The state’s controller, Bob Jaros, revealed Friday that single filers will get $69 and joint filers will receive $166. That’s because Colorado brought $453.6 million more into its coffers than TABOR’s formula allows the state to keep.
There’s much to celebrate about TABOR, with its cap on how much taxpayer money Colorado governments can keep from us (hence our refund) and its requirement that the people vote on tax increases. TABOR is about restricting how much government can sap our economy by returning OUR money back to us. It limits government’s size and growth and reminds our leaders that government belongs to the people.
TABOR came up on Friday, Aug. 27, when Gov. Jared Polis joined renowned conservative economist Art Laffer in a panel discussion at the Steamboat Institute’s Freedom Conference.
Polis touted the fact that, while governor, Colorado’s income tax has dropped from 4.63% to 4.5%. (Thank you, voters!) Later, he declared that Colorado’s income tax “should be zero.”
“If we can find another way to generate the revenue that doesn’t discourage productivity and growth — you absolutely can, and we should,” he added. Some conservatives jumped to embrace the Democrat governor’s position.
Not so fast. We must not ignore everything else Polis said.
“In effect, when you tax something, you penalize it,” Polis continued. “And there’s things you actually want to penalize in a society, like pollution might be one of them. I would argue that smoking might be one of them, cigarette taxes, sin taxes if there’s an applicable cost to people.”
Because we don’t want to discourage income, he argued, Colorado would be better off basing taxation on “taxing pollution or carbon or something that we fundamentally don’t want. You’ll have a more pro-growth tax structure that gets the right incentives in place to help grow what you want to grow and penalize things that are negative externalities.”
True, a tax is a penalty. The more you tax something, the less you get. Income taxes penalize income, just as capital gains taxes penalize investment and sales taxes penalize commerce.
But Polis’s comment raises three questions for him: How do you determine the things “we don’t want”? How do you decide if a tax on something “bad” will actually raise revenue and reduce the supposed harm? And how do you account for the damaging side-effects of a new tax? For example, a carbon-tax risks significantly diminishing Colorado’s status as America’s 7th-largest producer of oil and gas.
When asked about the rise in fees during his tenure, Polis dodged. First he blamed the increases on Colorado voters and last year’s Proposition 118. Recall that 118 establishes a new paid family and medical leave program funded by “fees” (even though they operate as a payroll tax). Polis claimed “70 or 80%” of fee hikes are from Prop 118. He emphasized it was voter-approved.
Then, Polis defended fee increases, which don’t require voter approval under TABOR. He claimed that “conservatives generally like” fees “better than a tax” because “[w]hen there’s a fee, it goes to whatever it’s collected for.”
Laffer, the conservative panelist, disagreed. “A fee can be a tax by a different name. A fee can be something that is a payment for a service,” such as a state park, he said. “As long as that doesn’t substitute for other moneys out of the budget, it can be done that way.”
“Be very careful about fees,” Laffer cautioned. “When it’s a real fee — something that’s been used properly, done deliberatively and carefully — it’s fine. But otherwise, it does morph into a tax very often.”
Excluding specific “sin” taxes on things like gambling, cannabis and nicotine, Coloradans have rejected every single statewide tax increase initiative since TABOR. That includes Proposition 110, the tax hike for transportation voters rebuked in 2018.
That was less than three years ago. Yet this year, the Democrat-controlled legislature dismissed the will of the voters and passed expansive transportation bill financed by an array of new “fees.”
SB260 — which Polis signed into law — establishes “fees” on every Uber and Lyft ride, Amazon package, UPS shipment and DoorDash delivery. Significantly, even though we already have a gas tax, Polis put in a new gas “fee” of 2 cents per gallon, climbing to 8 cents in 2028, and a new 6-cent-a-gallon “fee” on diesel fuel, rising to 8 cents in 2026.
As I wrote in April, “It’s hard to see what makes this fancy new gas ‘fee’ any different from the gas tax we already pay. If we’re being honest, the only real distinction is that, by calling it a ‘fee,’ politicians don’t have to ask their constituents to vote on it. It’s a runaround of the Taxpayer’s Bill of Rights, or TABOR, which constitutionally mandates that Coloradans vote on new taxes or tax increases.’”
Gas taxes are “wrong,” Laffer inadvertently rebuked Polis during their panel. “You should never mix a tax with a spending item.”
As tempting as it is to cheer Polis endorsing an end to Colorado’s income tax, we must not ignore his many caveats and clever arguments. As usual, it’s the rest of the story that tells us what we really need to know.