DENVER–Efforts earlier this week by Governor Polis to gin up support among Republicans for a special legislative session and a deal to keep excess revenue under the Taxpayer’s Bill of Rights (TABOR) hit a wall of resistance, with the entire House Republican caucus as well as Senate Republican leadership rejecting the idea. One of of the deals being floated involves replacing Proposition CC–which faces an uphill battle on the November ballot–with a measure that would trade an income tax rate reduction in return for the state keeping all excess revenue for the next decade.
TABOR is a constitutional amendment passed in 1992 that, among other things, limits the annual growth of a portion of the state budget to a formula of population growth plus inflation. The state is required to refund excess revenue back to taxpayers, or get voter consent to keep it temporarily. Two recent forecasts, from the governor’s office and legislative council staff, put the surplus revenue that the state must refund to taxpayers at between $1.2 billion and $1.3 billion over the next three years.
But if passed by voters, Prop CC would eliminate what’s left of the spending limit, allowing the state to keep all excess revenues that would otherwise be refunded back to taxpayers in perpetuity. Prop CC was referred to voters by the Democrat-controlled Colorado legislature earlier this year.
But it has become apparent that the measure is in trouble. A robust No on CC campaign has been launched with an array of business leaders, taxpayer advocacy groups, and current and former elected officials organized against the measure. Proponents, on the other hand, have shown no sign of any kind of organized support campaign. Pollster Floyd Ciruli, regarded as having his thumb on the pulse of Colorado voters, recently cast serious doubt on the measure passing in his blog. “As the 2018 election highlighted, Colorado voters tend to be sympathetic to many local tax proposals, including TABOR overrides from schools, counties, municipalities and others, but are very skeptical of state tax increases,” wrote Ciruli. “A statewide permanent time out is likely to suffer from the same voter distrust of state government.”
Even the Denver Post editorial board, which has long been critical of the taxpayer protections in TABOR, noted Prop CC is a hard sell to voters. “It’ll be tough to argue that the state is hard-pressed for cash, or that it is crippled by TABOR, a year after historic investments were made in k-12 education, roads and higher education,” opined the Post in a June 20 editorial.
Even if Prop CC were to pass, it doesn’t go into effect until the 2020-21 fiscal year, leaving as much as $575 million in excess revenue to be refunded to taxpayers in early 2020. Thus the scramble for a special session and a TABOR deal that would capture that revenue.
As described in a July 3 Colorado Springs Gazette editorial, there are special session draft bills that would, among other things, repeal the existing Prop CC and replace it on the ballot with a measure allowing the state to keep and spend surplus revenue under TABOR for ten years in return for a temporary state income tax rate reduction, from the current 4.63% to 4.59%. According to the Gazette, those bills have at least two Republican co-sponsors; Senator Owen Hill from Colorado Springs and Senator Jack Tate from Arapahoe County.
A July 5 letter to Polis from the Senate Republican leadership welcomed the discussion of an income tax rate reduction, but went on to reject the notion of a special session and a deal around TABOR spending limits, noting that conversations with Senate President Leroy Garcia indicate that there isn’t enough support in the Senate as a whole to pass any proposals. “Thus, we urge you to not call a special session as the alternatives for an outcome would seem to be either a unilateral, partisan, effort or that nothing at all would be accomplished,” said the letter signed by Senate Minority Leader Chris Holbert and Senate Assistant Minority Leader John Cooke.
A July 3 letter to Polis from House Republicans–signed by every member of the caucus–was more succinct: “We urge you not to call a special session. We think Taxpayers should get the full refund they deserve. Any effort to undermine or take away the refunds of our citizens will be strongly opposed by us.”
According to the No on CC campaign, the revenue for rates deal would allow the state to keep and spend much more money than taxpayers would keep in their own pockets. “According to estimates, the proposed fix delivers $8 in tax increases for every $1 in tax cuts for the first year, and $5.30 in tax increases for every $1 in tax cuts over three years,” said a fact sheet put out by the campaign.
“The state isn’t starved for cash,” said Senator Cooke, who is also a member of the No on CC campaign advisory committee. “So if the math doesn’t work for taxpayers, there shouldn’t be a deal. If Democrats decide to pull and replace CC, I’m confident Coloradans will reject that too.”
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