Lessons Learned from Colorado’s Taxpayer Bill of Rights

Taxpayers’ Bills of Rights (TABORs) prevent state governments from increasing taxes or spending revenue growth without first obtaining voter approval. Several states are poised to adopt state TABORs in the near future. The State of Colorado adopted a TABOR in 1992. There are a number of lessons that other states can learn from Colorado’s TABOR experiment.

The Colorado TABOR

Colorado’s TABOR was enacted as an amendment to the Colorado Constitution. Essentially the amendment prohibits the Colorado Legislature from increasing state or local taxes without first obtaining approval of the Colorado voters.

Colorado’s TABOR also limits the amount of revenue growth that the state can retain and spend to the sum of inflation plus population growth. Revenue growth in excess of that sum must be refunded to taxpayers via tax refunds; however, the Legislature has the right to ask the voters to approve spending surplus revenues.

Colorado’s TABOR also provides that when tax revenues decline the government’s spending limit must decline accordingly.

Colorado’s TABOR in Action

Colorado voters have not approved an increase in taxes or the spending of surplus revenues since the TABOR was enacted, although until recently they had never really needed to.

Colorado’s economy performed fairly well from the time that the TABOR was enacted up until the technology bubble in the late 90’s and the recession that began in late 2001. These economic downturns have reduced the state’s tax revenues, which has caused the state’s spending limit to decline. Simultaneously, the state has had to increase spending on state-mandated public education and federally-mandated Medicaid programs–both of which will continue to require increased spending in the future. The end result: Colorado is now facing the perplexing situation of having an estimated $234 million budget deficit and, at the same time, due to the TABOR, having to refund an estimated $345 million to taxpayers (too bad the State of Colorado can’t simply print more money!).

The Future of Colorado’s TABOR

So where does this leave the State of Colorado? It leaves the state government in a tough position.

It would be very difficult for Colorado’s politicians to convince Coloradoans to repeal the TABOR. Colorado voters, like the voters in any other state, would not be likely to repeal any Constitutional amendment that grants them the right to write their own tax bill and to limit the amount of money that the government can spend.

The fact that the TABOR is a Constitutional amendment, rather than just a state statute, makes it even more unlikely that the TABOR will be repealed. If that is not enough to secure TABOR’s future, the fact that many of the politicians currently serving in Colorado, including the current governor, were integral to the enactment of Colorado’s TABOR should do the trick. So absent a miracle or a disaster, Colorado’s TABOR will likely remain on the books.

This leaves Colorado politicians in the position of having to modify the TABOR. The governor has proposed the most widely cited modification. The governor’s proposal is to allow the government to keep the prior years spending level even though the year’s tax revenues have declined. Other proposals include various modifications that would allow the legislature to temporarily ignore the TABOR. The implication of the governor’s proposal and of most of the other proposed modifications is that the government will end up spending more money regardless of the TABOR. This process is strikingly similar to how the U.S. Congress set aside its own spending reform legislation.

So where do Coloradoans stand on this issue? It appears that most Coloradoans have not paid much attention to the issue.

The Lessons from Colorado’s TABOR

Perhaps the clearest message from Colorado’s TABOR is one of warning. A TABOR that is inflexible will probably not serve the needs of the state when times are tough. The TABOR Will have to be modified and garnering enough attention to actually make the change will prove to be difficult. While the end result may be reduced spending or appropriate spending, the inability to change when needed could pose a significant problem for the state.