Finally, a TABOR refund that’s good for you

Colorado has the Taxpayer’s Bill of Rights to thank for one of the most unfair income tax schemes in the nation — everyone, regardless of income, pays a flat tax rate of 4.55%. And now taxpayers have TABOR to thank for the tax code, temporarily, getting just a little fairer.

A family of four with an adjusted gross income of $60,000 pays the same percentage of their income as a single person making $500,000 a year. That is unfair. A 4.55% pay cut affects a low-income family significantly more than it does a wealthy family, and TABOR made that flat tax a constitutional requirement.

So it makes sense that when the state “over collects” taxes according to the arbitrary formula in TABOR, some of that money be directed toward lower-income and middle-class Coloradans. Rarely has that happened. Historically, with the exception of 2015 when

TABOR refunds were used to make a tax credit for the working poor a permanent feature in the tax code, refunds have gone to taxpayers proportionally based on how much they paid. Yes, in some ways that makes sense, but it simply perpetuates an already unfair system.

On Monday Gov. Jared Polis and Democrats in the General Assembly announced they are rebating an estimated $1.4 billion in taxes to tax filers based on a flat amount. The rebates will arrive to taxpayers this summer. Regardless of how much they made or paid, everyone will receive $400 ($800 for those married filing jointly). In other words, the person who paid the most taxes will get the same refund as the person who paid the least.

Colorado will go from one of the most regressive tax states to a much more progressive system.

However, the proposal has a downside: It is not permanent. The rebates will arrive in August or September, but in future years the state could fall back on the old TABOR refund mechanisms — a reduction to the flat tax and then a complicated “sales-tax” rebate that has a title to make it sound fairer, especially during inflation, but actually isn’t based on how much money working families are spending.

We are glad to see some incremental work in that regard.

For example, last year as part of the Tax Fairness for Coloradan’s legislation, lawmakers passed a doubling of the tax credit for the working poor (Colorado’s version of the federal Earned Income Tax Credit). While the EITC technically isn’t a TABOR refund, like all tax expenditures it works to offset some of what would have been refunded through TABOR when the state exceeds its revenue cap.

In the next General Assembly, we urge lawmakers to scrap the antiquated TABOR refund mechanism and find a more equitable way to treat Colorado taxpayers. Lawmakers will have had the benefit of seeing how the per-household refunds helped Colorado families and the ability to see how skewed to higherincome Coloradans the income tax rate cut is.

In an ideal world, Colorado lawmakers would be able to reinvest that money in the programs that disproportionately benefit low-income and middleclass Coloradans like public schools, public transportation (roads, bridges, bike lanes, sidewalks and transit), public safety, public health and state parks.

But TABOR is nothing if not intransigent; at least we can say we have learned to make certain it’s not also inflexible.