Voters need to end the Taxpayer Bill of Rights runaround
Watch the hand that appears to be doing nothing. It’s not as easy as it sounds. The magician is staring at the other hand, talking about it, drawing your attention to it. The hand that holds the coin is the one you’re supposed to ignore. Managing the audience’s attention to distract it from what’s really happening is the secret to sleight of hand.
This art of misdirection has Colorado voters looking at the wrong hand. While critics of the Taxpayer Bill of Rights (TABOR) launch dramatic legal challenges and ballot initiatives to dismantle this vital law, legislators have been quietly circumventing it.
TABOR, passed by Coloradans in 1992, prevents lawmakers from raising taxes without the approval of voters. The law also ensures revenue to the state that exceeds a cap (based on inflation and population) is refunded to the voters. Because TABOR amended the Colorado constitution, the legislature cannot tinker with it without the approval of voters.
It’s highly unlikely voters would consent to modifying or eliminating TABOR if asked. Although Coloradans voted to relax revenue limits for five years in 2005 (Referendum C), last year voters rejected a measure to essentially eliminate the revenue cap. Moreover, voters have rejected all but three of the tax increases— on tobacco, marijuana, and online sports betting—placed before them. Even as the state has grown politically bluer, a majority of Coloradans continue to support TABOR limits on taxing and spending.
Since voters don’t want tax increases and won’t part with their TABOR refund checks, legislators have found a way to raise taxes and increase revenue by exploiting a little known provision in the law. The Taxpayer Bill of Rights exempts revenue generated by State Enterprises. Enterprises are governmentowned businesses that receive less than 10 percent of their revenue from state and local government and are funded primarily through fees for service. Enterprises include: Colorado public universities, the state unemployment insurance program, and Colorado Parks and Wildlife, which are funded primarily through tuition, premiums, and license fees respectively. These fees for service are supposed to fund the enterprises’ programs not add revenue to the general fund.
When exercised as intended, the enterprise exemption works well. Colorado Parks and Wildlife does not have to go to the ballot box every time it intends to raise campsite fees. Furniture sold by Colorado Correctional Industries contributes to the prison system and is not subject to the TABOR revenue cap. Unstatewide fortunately, court decisions have made it easier for lawmakers to abuse the provision. The courts have allowed enterprise revenue to contribute to the general fund. When the government collects a “fee” and uses it for another purpose, it is a tax that never received voter approval and the revenue from that tax should not be exempt from the TABOR revenue cap.
That’s how the legislature is using the enterprise exemption to levy new taxes via fees and to
increase revenue beyond the annual cap. According to the Common Sense Institute, “In 1993, the first year of TABOR limits, only 46% of the total state spending was exempt, or $2,403 per Coloradan in 2019 inflation adjusted dollars. In 2019, 69% of total Colorado state spending was exempt from TABOR, which equates to an amount of $5,787 per Coloradan.”
The amount of fees Coloradans pay has likewise increased. The institute found, “In the year 2000, fees amounted to $222 per Coloradan, while General Fund spending amounted to $1,174 per resident. By 2018, fees equaled $3,136 per Coloradan, and General Fund spending equaled $1,864.” The fee total will continue to increase. The legislature created another new enterprise this year through Senate Bill 215 to collect a projected $130 million in fees from insurance companies and hospitals. Through clever sleight of hand, legislators have thus increased taxes and revenues without voter consent.
The only recourse voters have is to pass a ballot initiative to rein in the abuse. Initiative 295 will give Coloradans such an opportunity this November. The measure would require voter approval for enterprises “with projected or actual revenue from fees and surcharges of over $100,000,000.” The initiative would not impact existing enterprises or small enterprise agencies. It targets only the most egregious TABOR runarounds that legislators may be tempted to employ in the future.
Now that we see through the deception, it’s time to put an end to the disappearing coin trick.