Break antiquated Colorado tax policy free of TABOR

Twenty-five years ago, few people had even heard of something called the “internet.” Few people owned a cell phone. Many people still used typewriters or wrote letters by hand, waiting patiently days or even weeks for their messages to be received.

That was 1992. It was the same year voters in Colorado passed something called the Taxpayer’s Bill of Rights, or TABOR. The amendment to the Colorado Constitution specified limits on how quickly state revenue could grow, and it mandated that tax policy changes had to go before voters.

In the 25 years since TABOR passed, we’ve come a long way in terms of technology. Everyone carries a tiny computer in their pockets far more powerful than any full-size model you could buy in 1992. You can make video phone calls from around the planet and send documents instantly, nearly rendering penmanship a lost art.

Thanks to TABOR, though, what hasn’t changed much is tax policy in Colorado, despite the fact that our state and its economy have been changing dramatically with each passing year. In essence, TABOR has frozen our tax policy in amber since 1992.

Because Colorado lawmakers are the only ones in the country who can’t increase taxes at

all, they won’t repeal or modify outdated, inequitable and unproductive taxes because they can’t replace the revenue with any kinds of new taxes. The business personal property tax is a prime example.

Worse, though, TABOR has imposed a formula on state government that guarantees it will never be able to keep up with rising costs. TABOR says state revenue may only grow by the rate of inflation plus population every year. So if inflation is 2 percent and population grows by 2 percent, revenue can grow 4 percent. Any revenue collected above that limit must be rebated to taxpayers.

This sounds like something based on economic policy. It isn’t. TABOR uses the Consumer Price Index as the guide to inflation, meaning that it measures increases in prices for clothing, food, plane tickets, toasters and so on. These are all consumer goods, not goods purchased by government. The state buys road construction, school teachers, college classrooms, public safety and other goods and services consumers don’t.

The way government buys things is really not much different from how businesses buy things. Someone who owns a construction company might look at the price of lumber, bricks and construction workers. They wouldn’t try to gauge their costs based on the prices of shoes, cottage cheese and basketballs. Just as government does, businesses look at costs in their sector of the economy.

The things government buys have gone up in price much more significantly than consumer goods have since 1992. And so every year revenue is limited by the rate of consumer inflation, we’ve been falling behind.

Besides, tax revenue grows and contracts with the economy while consumer prices don’t necessarily do the same. Limiting revenue based upon consumer pricing doesn’t account for this.

The results have been painful. Colorado has dropped from 23rd in per-pupil funding for K-12 education in 1993 to 40th now, with our funding $2,000 below the national average. We used to be several hundred dollars above the national average.

In 2000, the state paid two-thirds of the cost of sending a student to college while families paid one-third. Those proportions are now reversed, and Colorado is 48th in support for higher education.

All these things have gotten worse as the state’s population has exploded, but roads are one place it’s immediately noticeable. The state’s population has increased by 56 percent since 1991, and the annual congestion time in major urban areas has increased by 283 percent.

According to the Colorado Department of Transportation, the number of congested road miles in our state will nearly triple by 2035, with the average delay expected to increase by 48 minutes.

Normally, the increasing number of people coming to our state would mean there would be an ever-increasing amount of revenue available to pay for additional teachers, road repairs and expansions and more college professors. But because of TABOR, every new person who comes to Colorado, regardless of whether they are all millionaires, can contribute only about $2,500 in taxes before the state has to start issuing rebates.

That amount of money isn’t enough to educate one child, much less fix roads, keep public safety and do all the other things we do collectively as citizens to make our state a place worth living in.

In short, TABOR is preventing newcomers from being able to pay their way.

All the while, TABOR continues to ratchet down our property tax base, shorting schools and local fire districts. Because of how TABOR interacts with other parts of our constitution, it has been lowering the statewide residential assessment rate — the proportion of our homes on which we pay property taxes. Under TABOR, the rate can go down but it can’t go back up when economic conditions change.

That’s why the residential assessment rate is now less than a third of what it used to be. And it contributes to why the state is facing such a big shortfall this year. Legislators will have to cut property taxes, making it likely they will have to cut schools. Local fire districts, who also depend on property taxes, will be getting cut too.

Supporters of TABOR will say that all that needs to occur is for voters to act. Lawmakers could refer measures to voters asking for higher taxes or to forgo tax rebates. But TABOR supporters know how hard it is to corral enough votes in the legislature to make this happen, to say nothing of the expense.

And neither of these things will resolve the fundamental problems in TABOR.

Twenty-five years is a long time to go without an upgrade or even basic maintenance. It’s time to look at TABOR and ask if we should merely fix it or if we’re ready for something better.