Coloradans are projected to receive billions in tax refunds by 2023, but statehouse Democrats would rather they don’t.

The majority party wants to spend the money on infrastructure projects at public universities and prisons, on roads and in education — even though the state budget is relatively flush and Colorado is receiving $3.8 billion in federal stimulus funding.

Doing this will require working around the Taxpayer’s Bill of Rights, which is sure to bring pushback from Republicans. And, with 2022 elections just around the corner, voters may not like it either (in 2019, they rejected a Democratic ballot measure to let the state government keep TABOR refund money).

“We’re going to see dollars that certainly could be utilized for our budget priorities going back in ways that aren’t as tailored, as focused,” said Democratic Rep. Julie McCluskie from Dillon, the vice chair of the state Joint Budget Committee. “When we can make additional investments in those needs and services, it feels like the responsible thing to do.” 

Why refunds are on the table

Democrats describe their idea to avert TABOR as creative. Republicans see it as cynical and out of step with the will of voters. 

TABOR requires every Colorado tax hike to be approved by voters, which means city councils, county commissions and the state legislature cannot alone rewrite tax codes. But the coming fight over refunds is about more than that.

“The problem is that people think TABOR is about getting to vote on taxes,” said Denver Democratic Sen. Chris Hansen, a member of the Joint Budget Committee. “Well, it’s also about 12 other things” — including giving taxpayers refunds if the state’s growth in tax-generated revenue outpaces the growth of population plus inflation. 

Because Colorado’s economy has bounced back quickly from a profound early-pandemic dip — lawmakers in spring 2020 cut about $3 billion from the General Fund, three times more than during the Great Recession — the state is projected to reach the refund cap for the next three years. 

Legislative analysts estimate almost $2 billion in refunds, which would be largely spread over three checks to individual taxpayers — around $50 apiece, or more, for most and into the low hundreds for wealthier earners. It would also trigger a small income tax cut across the board. 

The governor’s budget staff is more optimistic, projecting closer to $3 billion in refunds. 

It’s too late, Democratic lawmakers say, to try to capture this year’s refund money, but they could get the bulk of what’s projected in the next two. 

Democratic strategy, GOP pushback

TABOR hamstrings government in many ways, but, crucially, it does not prevent lawmakers from creating new “enterprises” funded by fees — a charge tacked on to a purchase of gas or renewal of a license, for example. Enterprise fees take from wallets the same as taxes do, but the money they bring in doesn’t count against the refund cap.

If Democrats create enterprises for more fees, they can bring in the same or more revenue while lowering refund obligations. 

“And we’ve got a list of options in that category,” Hansen said.

The most tenured budget official in the legislature, Republican Sen. Bob Rankin of Carbondale, laughed when asked by The Denver Post about Democrats’ plans.

“Of course they want to keep (the money),” he said. 

He argued it would violate TABOR’s spirit and is poor economic policy. All that refund money is better off in people’s pockets, he said — not the legislature’s.

Democrats think the $3.8 billion the state is receiving from the federal American Rescue Plan Act won’t solve long-term funding problems and thus is no reason to get comfortable now. They point to billion-dollar infrastructure backlogs and underfunding of education as problems that will outlive the stimulus money.

“The budget is not in good shape,” said Hansen, arguing that nearly 30 years of TABOR restrictions have created backlogs so great that a rising state economy and federal stimulus money aren’t enough to meet the state’s spending needs.

Rankin makes the opposite case.

“That’s an awful lot of money, and covers these same three years” when refunds are projected, Rankin said, noting that local governments are also receiving billions in stimulus. “So why should we find clever ways to defeat TABOR when in fact we have all that federal money there?

“Until (June) we did not expect this money to even exist. Obviously we were planning a budget without it, so why do we all the sudden desperately need it?”

This possible attempt to work around TABOR would be the latest in a series of recent Democratic efforts to aggressively counteract state tax law. Earlier this year, they approved a $5.4 billion transportation funding scheme, on the back of the very fee-based strategy they could employ to lower refunds. They passed a temporary $200 billion property tax cut to thwart a conservative group’s much bigger proposed property tax cut. 

And in each of the last two years, they’ve passed laws to eliminate some tax credits — that’s one thing TABOR still lets lawmakers handle — in an effort to shift a few hundred million dollars from wealthier interests to needier ones. 

There is, however, some openness on the GOP’s part to certain Democratic arguments on fiscal policy. 

The 2020 proposal to ask voters to rewrite the state property tax equation had bipartisan sponsorship, as did this year’s property tax bill. Republican Sen. Kevin Priola of Henderson and Republican Colorado Springs Mayor John Suthers were two of the leading voices on the transportation funding law.

Priola told The Post in June that the legislature should not sit idly by if aspects of TABOR will harm the state.

“I like TABOR,” Priola told The Post in June, “but TABOR isn’t a suicide pact.”

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