The Taxpayer's Bill of Rights

TABOR gives Colorado citizens the right to decide whether or not government should increase spending.

Summary

  • The Taxpayer’s Bill of Rights is the single-most empowering tool for Colorado voters and taxpayers.
  • The Taxpayer’s Bill of Rights has returned over $2 billion to Colorado taxpayers and is certain to return billions more in the years and decades to come.
  • Repealing the Taxpayer’s Bill of Rights means giving the government a blank check to raise taxes at any time.
  • While politicians blame the Taxpayer’s Bill of Rights for budget shortfalls, it has in fact has spurred economic growth in the state.
  • The Taxpayer’s Bill of Rights makes Colorado voters more educated – and thus more thoughtful – about taxing and spending decisions. When armed with the power to make important fiscal decisions, Colorado taxpayers have proven, at their core, to be a fiscally responsible people.
  • The Taxpayer’s Bill of Rights simply imposes fiscal discipline on the state’s politicians and requires the consent of the governed before spending additional public money.
  • The Taxpayer’s Bill of Rights forces Colorado’s state government to prioritize our $30 billion annual budget.
  • The Taxpayer’s Bill of Rights protects government programs for declines in funding during recessions because the swings in tax revenue are smaller.

Issue Background

In 1992, Colorado voters approved the Taxpayer’s Bill of Rights (TABOR), an amendment to the state constitution designed to limit the growth of state government. The Taxpayer’s Bill of Rights greatly altered the dynamics of fiscal policy in Colorado, taking the matter of tax increases out of the hands of politicians and placing it directly into the hands of voters.

The Taxpayer’s Bill of Rights requires majority voter approval to increase tax rates, to assume new debt, or to increase government spending more than the rate of inflation plus state population growth. In addition, TABOR requires that any revenue collected in excess of the state’s spending limits (plus an emergency relief fund of 3 percent of spending in a fiscal year) must be returned to taxpayers in the form of rebates.

Colorado’s experiment with The Taxpayer’s Bill of Rights is the first of its kind in the United States and has been subject to several modifications – and substantial bureaucratic opposition – over the years. The greatest of these changes to the amendment came in 2005, when Colorado voters approved Referendum C, forgoing TABOR tax rebates for five years. This was done in the wake of an intense campaign funded predominantly by supporters of bigger, more activist government, who claimed that state parks, universities, and other state-funded institutions would close without passage of the measure.

In 2011, The Taxpayer’s Bill of Rights again came under assault as a group of special interests filed a lawsuit arguing that the program was unconstitutional, alleging that “(an) effective legislative branch must have the power to raise and appropriate funds. When the power to tax is denied, the legislature cannot function effectively to fulfill its obligations in a representative democracy and a Republican Form of Government.”

The lawsuit eventually made it to the U.S. Supreme Court, but then in June of 2015 was referred back to the U.S. Court of Appeals for the Tenth Circuit in Denver. Legal experts believe this referral will mark the end of the lawsuit, validating definitively the constitutionality of The Taxpayer’s Bill of Rights.

Critics continue to contend that The Taxpayer’s Bill of Rights hinders the proper role of state government, citing data they say highlights how far Colorado spending has fallen relative to other states. Further, they suggest that the five-year moratorium on tax rebates from Referendum C proved insufficient to the state’s needs, as it occurred smack in the middle of the Great Recession.

Supporters argue that the Taxpayer’s Bill of Rights is the single most empowering tool that taxpayers have ever enjoyed, and that the fiscal discipline it enforces has been the primary key to the state’s economic growth in the years since its ratification. The taxpayers of Colorado have proven to be quite measured, if imperfect, in their employment of the power to approve or disapprove of tax increases. For example, voters in 2000 approved Amendment 23, an education spending mandate aimed at increasing spending for K-12 public education (ironically, Amendment 23’s mandated annual spending increases has done more to cause budget shortfalls than anything related to TABOR).

However, a little over a decade later, those same voters soundly defeated Amendment 66, a proposed billion-dollar tax increase ostensibly designed to further fund K-12 education. Amendment 66 came with no safeguards in place to prevent funds from going to Colorado’s nearly bankrupt public pension system, rather than the classrooms to where the funds were intended. Voters defeated the measure by a 2-to-1 margin, even after supporters spent $10 million promoting the measure.

Municipalities around the state have also devised ways to work around some of TABOR’s revenue-retention requirements through local ballot measures. Passing ballot initiatives aimed at allowing cities to retain all or part of the revenue in excess of the TABOR-limit is known as “de-Brucing,” after the principle author of the TABOR amendment, Douglas Bruce.

According to the Colorado Municipal League, there have been hundreds of de-Brucing measures introduced across the state, nearly 90 percent of which Colorado voters have approved as of 2016. This is likely because local governments can point to specific items which the retained revenues will be used to fund – for instance, a local library, park, police vehicle, etc. – as opposed to the more general funding allocations at the state level.

It is important to note, however, that much of the state’s tax base is local, and that many de-Brucing measures are in perpetuity, meaning that communities that have “de-Bruced” are in many respects exempting significant percentages of the tax they pay from being subject to TABOR limits.

Nevertheless, as a whole, Colorado voters have proven to be largely fiscally responsible, and the power granted to them through the Taxpayer’s Bill of Rights has succeeded in keeping Colorado’s spending in check. Spendthrift bureaucrats and proponents of big, activist government continue to strenuously oppose the amendment, which may be indicative that the Taxpayer’s Bill of Rights is doing exactly what it was designed to do.

In 2015, Colorado taxpayers received their first TABOR-triggered refunds in 15 years; Coloradans have seen refunds in subsequent years as well, as the state’s economic growth continues – advocates would argue because of this prudent fiscal policy, not in spite of it.

The fiscal discipline imposed by the Taxpayer’s Bill of Rights, coupled with the state’s Balanced Budget Amendment, has kept spending and debt in check; made Colorado a tax-friendly state that is attractive to business; and encouraged private-sector growth.

Nevertheless, the Taxpayer’s Bill of Rights will likely continue to come under fire from groups and politicians who support expanded government programs and powers.

Colorado’s unique model for success is based largely keeping this important, unprecedented constitutional amendment intact, and retaining the taxpayers’ rights to decide if government needs additional tax dollars.

Governing Principle

Limited Government: The Taxpayer’s Bill of Rights is clearly a direct effort to limit the size and growth of government. Without active restraint, governments naturally grow over time, encroaching on more and more of our lives and activities. America’s founding was based on the idea that government should be limited by all means possible with provisions only for narrow, specific purposes.

Solutions

  • Reject bureaucrat-and-special-interest-led initiatives that withhold TABOR-mandated tax refunds. The Taxpayer’s Bill of Rights is the law of the land, and lawmakers must be held accountable.
  • Appoint state judges who respect Colorado’s constitution and will support taxpayer rights.
  • Oppose the imposition of “fees” and other TABOR workarounds, which are merely taxes by another name.
  • Oppose disingenuously converting government operations and revenue-generating mechanisms into “enterprises” for the purpose of exempting the revenues generated from TABOR caps. Enterprises are defined as “government-owned business authorized to issue its own revenue bonds and receiving under 10% of annual revenue in grants from all Colorado state and local governments combined,” and are exempt from TABOR-imposed limitations. The definition of “enterprise” should be kept clear and interpreted narrowly, to prevent misuse of the concept as a way to circumvent TABOR.
  • Promote further spending and budget reforms, such as zero-based-budgeting, to ensure the state prioritizes spending appropriately, and can more easily keep within its limits.
  • When Colorado revenues exceed those of its projections, it is a sign of the state’s robust fiscal health. The Taxpayer’s Bill of Rights can and should continue to force the state’s bloated bureaucracy to behave prudently, just as its hardworking taxpayers do on a daily basis.
  • Oppose any measure to weaken or eliminate The Taxpayer’s Bill of Rights legislatively or via the ballot.
  • Use the power of The Taxpayer’s Bill of Rights to drive reforms across state government, most notably in the state’s woefully underfunded public pension system. Absent the ability to spend its way out of the problem, PERA must reform structurally to keep the promises it has made to over half a million current and future retirees.

Key Statistics

  • Since the Taxpayer’s Bill of Rights became law in 1992, the program has refunded over $2 billion to Colorado taxpayers. (Source: Colorado Department of the Treasury)
  • Colorado has issued TABOR-triggered refunds to taxpayers six times. (Source: Colorado Department of the Treasury)
  • In the decade preceding the Taxpayer’s Bill of Rights, Colorado’s per capita income growth lagged behind the national average. In the decade following TABOR’s passage, the state’s per capita income growth far outpaced the national average. (Source: Civitas Institute)
  • Between 1996 and 2016, median household income in Colorado, adjusted for inflation grew by 30%, over twice the national rate over the same time frame. (Source: Federal Reserve Bank of St. Louis | link)
  • Only Minnesota and North Dakota grew by more than 30% over that period.
  • Colorado gained more than $20 billion in adjusted gross income between 1992 and 2016, among the largest gains in the nation.
  • For FY 2016, Colorado ranked #20 among states for government spending per capita ($6,629, or 13% above the national average). (Source: National Association of State Budget Officers (NASBO))
  • Colorado remains the only state in the country with a Taxpayer’s Bill of Rights. Five states – Florida, Maine, Nebraska, Oregon, and Washington – have put a TABOR measure on the ballot, but all have failed. (Source: Center on Budget and Policy Priorities)

Resources:

The TABOR Foundation
http://thetaborfoundation.org/

Independence Institute
http://tax.i2i.org/articles/1-2000.PDF

http://tax.i2i.org/articles/IP_2_2010_WEB.pdf

Colorado Public Radio
The Taxman – How Douglas Bruce And The Taxpayer’s Bill Of Rights Conquered Colorado
https://taxman.cpr.org/tabor-25-the-taxman-how-doug-bruce-conquered-colorado.html

Colorado LegiSource
Creating an Enterprise Pursuant to TABOR
https://legisource.net/2017/01/19/creating-an-enterprise-pursuant-to-tabor/

http://www.coloradofiscal.org/wp-content/uploads/2015/01/Colorado-State-Tax-Basics-2015.pdf

http://www.colorado.gov/cs/Satellite/Treasury_v2/CBON/1251592160342

http://www.heritage.org/research/reports/2005/07/colorados-taxpayers-bill-of-rights-should-not-be-breached

http://www.colorado.gov/cs/Satellite?blobcol=urldata&blobheader=application%2Fpdf&blobkey=id&blobtable=MungoBlobs&blobwhere=1251601829805&ssbinary=true

www.cato.org/pubs/bp/bp95.pdf

http://taxfoundation.org/blog/colorado-will-face-vote-tabor-refunds-marijuana-taxes

Are PERA and TABOR on a collision course?

http://i2i.org/articles/taborpfiffner.pdf

http://watchdog.org/233991/attacks-tabor-continue/

https://www.nccivitas.org/2015/a-taxpayer-bill-of-rights-for-north-carolina-examining-misleading-claims-about-colorado%E2%80%99s-tabor-experience/

http://www.heartland.org/custom/semod_policybot/pdf/17298.pdf

https://bellpolicy.org/node/1196

https://bellpolicy.org/sites/default/files/TABOR10.pdf

CSU study finds 80 percent of Colorado taxpayers pay more because of TABOR

http://completecolorado.com/pagetwo/2015/07/14/supreme-courts-tabor-ruling-good-news-for-colorado-taxpayers/

http://www.ncsl.org/research/fiscal-policy/state-tax-and-expenditure-limits-2010.aspx

TABOR INTACT FOR NOW: U.S. Supreme Court Sends Kerr for Retrial

http://www.ijreview.com/2015/02/245209-forget-income-tax-refunds-coloradans-might-get-marijuana-refund-paid-money-pot/

http://gazette.com/hickenlooper-has-plan-to-cut-down-on-colorados-pending-tabor-refund/article/1549969

http://www.cml.org/Issues/TABOR/2015-02-12-Legislative-Workshop-TABOR-in-2015–New-Challenges-From-An-Old-Friend/

Center on Budget and Policy Priorities
A Formula for Decline: Lessons from Colorado for States Considering TABOR
https://www.cbpp.org/archiveSite/10-19-05sfp.htm

http://www.cbpp.org/research/state-budget-and-tax/policy-basics-taxpayer-bill-of-rights-tabor