Colorado could pay equal TABOR refunds next year — $661 a piece — but only if voters approve property tax changes

Hart Van Denburg/CPR News
Democratic state Rep. Chris deGruy Kennedy, at the Capitol, March 2, 2023.

In the final days of session, Democratic state lawmakers are moving ahead with a proposal that could significantly change how the state pays billions of dollars in taxpayer refunds next year. But the change comes with a political twist that has Republicans fuming.

Under the last-minute proposal, every taxpayer could receive a TABOR refund of about $661 next year — a change from the state’s default system, which gives bigger refunds to people who paid higher income taxes.

The change could mean that the poorest Coloradans get checks that are $200 larger, while the richest would lose out on nearly $800 a piece, resulting in everyone getting the same exact amount.

“There's a lot of people that are struggling to keep up with the cost of living. And this is a great way to make sure that those refunds are going back into the pockets of people who need that help,” said Rep. Chris deGruy Kennedy, a cosponsor.

But it would only happen if voters approve a bigger package of changes to property taxes and refunds.

The change comes with a big caveat.

The whole thing is tied to Proposition HH, the property tax plan that Gov. Jared Polis introduced this week.

As it was originally proposed, Prop. HH would lower property tax rates, while also reducing the money available for TABOR refunds, for ten years. The math is complicated, but the idea is that money that would normally go into the refund pool is instead sent to schools and local governments to make up for some of their lost property tax revenues. The result would be lower property taxes, but also smaller refunds for all taxpayers.

The new proposal, HB23-1311, only takes effect if Prop. HH becomes law. Basically: If voters agree to the property tax adjustment, the state will then pay a single flat refund amount to everyone next year. But if voters shoot down HH, refunds for next year will instead be paid on the regular system, which is based on income, with lower earners getting less.

Republicans have decried the move to make equal refunds contingent on Democrats’ property tax plan. Last year, Democrats made a similar but unconditional change to refunds. They had not moved to do so this year until after the bill for Prop. HH was introduced.. 

Equalizing TABOR refunds ”is the bribe to the people of Colorado so that they will pass Prop. HH,” said House Minority Leader Mike Lynch. 

Voting yes on the property tax measure could mean a bigger TABOR refund for individuals making less than $100,000, which is just more than half of taxpayers, while others would get less.The overall refund pool would be about $167 million smaller because of Prop. HH.

Rep. deGruy Kennedy argued that connecting the policies would make the property tax deal more favorable for renters and lower-income people. As it stands, if Prop. HH passes alone, without refund equalization, it would result in everyone getting a smaller TABOR refund.

Equal refunds are “a critical component to make sure we’re doing more for renters, more for lower-income people,” deGruy Kennedy said.

Why connect the proposals?

The original property tax plan had drawn criticism because it was reducing every taxpayer’s refund in order to benefit property owners. That drove new interest in adjusting TABOR refunds — although that idea had been part of the conversation already, said Scott Wasserman, president of the progressive Bell Policy Center.

“It just became very clear, especially when we started to hear Senate Republicans of all people talking about the inequitable impact on renters … I think there was a real rush to try to figure out how to solve that,” Wasserman said. “I think it was a tool on the table, and it was just in the last few days that folks down here thought that we should use that tool.”

Lynch argued that if flattening the refunds is the right thing to do, the legislature should simply do so. He offered an amendment that would have made the flattening bill effective immediately, but that failed. 

“Why do we need to wait for Prop. HH to pass?” he said. “With that green button, we can very simply say we want this to go into effect, regardless of what happens on SB-303.”

DeGruy Kennedy acknowledged that flattening refunds was indeed meant to help Prop. HH pass.

“It is that,” he said. But he pointed out that others have similarly asked why the legislature wouldn’t just pass other elements of the Prop. HH plan, such as the property tax discount for seniors.

“You can't just take out all the most popular elements of a policy proposal and expect it to pass on the ballot. So, yes … we want this to be part of the property tax reduction package.”

The change would be temporary.

The change to TABOR refunds will last only one year, after which payouts would go back to the tiered section. DeGruy Kennedy said he wants to see equal TABOR refunds permanently, but agreed to a temporary change as a compromise with the administration of Gov. Jared Polis.

“We have an agreement this year that we're gonna stick with a one-year flattening of the TABOR refunds. But I have every intention of bringing a bill next session to continue the flat refunds into the future,” deGruy Kennedy said.

If Prop. HH passes, it could eventually lead to a significant reduction of TABOR refunds. By 2032, the measure would allow the state to keep more than $2 billion of additional revenue per year, sending it to local districts and schools rather than refunding it.

A representative for the governor didn’t immediately respond to a request for comment.

Lynch, the Republican minority leader, supported the move last year to distribute equal TABOR refunds. But he’s soured on the idea, saying that the Polis administration had politicized the matter — first by sending out letters from Polis with last year’s “Colorado Cashback” checks, and this year by tying it to Prop. HH. 

“I didn't anticipate that it would be turned into a political tool,” he said.

He also criticized the rapid speed and late introduction of the tax measures, which are flying through the legislature in just a matter of days as they race to beat the Monday midnight deadline for the end of session. 

The TABOR refund measure, after being introduced on Saturday, made it through its first committee and a full House vote within a matter of hours. House debate was limited to one hour

On Sunday, the measure will need to get through one more vote in the House, as well as a committee hearing and preliminary vote in the Senate, to stay on track for final approval Monday.