TABOR Returns in Colorado

Thursday, July 22, 2010 10:03 AM

Some good news for Colorado taxpayers – the Centennial State’s Taxpayer’s Bill of Rights (TABOR) comes back into effect this month after a five-year hiatus.  TABOR requires that increases in tax revenue be tied to inflation and population increases unless larger increases are approved by a referendum.

The return of TABOR in Colorado helps put the spotlight on the importance of fiscal limits across the country. The constitutional amendment, first passed in 1992, resulted in massive government savings that were required by law to be returned to taxpayers. Between 1997 and 2001, taxpayers received $3.2 billion in tax refunds. Unsurprisingly, between 1995 and 2000, the state ranked first in growth state product growth and second in personal income growth. Referenda on increasing taxes were swiftly voted down by Coloradans who realized the positive potential of the spending limit.

Sensing the public’s aversion to higher taxes and spending, elected officials hatched ways to weaken the TABOR constraints on spending. In 2000, TABOR opponents passed Amendment 23 which mandated an increase in education spending even when state revenues are down. From 2001 to 2003, education spending increased in Colorado by $450 million.

This was followed by the passage of Referendum C in 2005, suspending Tabor’s revenue limit for five years. With Referendum C expiring, TABOR is back in effect, but with limited scope. The new limit will start where state revenues peaked in 2008, not at their current level. This political maneuver means that Colorado residents are projected to miss out on an addition $1.4 billion in tax rebates in 2011 and 2012. While its effectiveness has been weakened, spending limits – especially when proposed as constitutional amendments – are important tools for reining in the salient spending of politicians. While spending advocates won the battle with Referendum C in Colorado, it is our hope that other states will champion constitutional spending limits and not let them win the war. We look forward to TABOR’s reinstatement and hope it can once again be used as a tool to promote prosperity for Coloradans.

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