Colorado Delivers Body Blow to TABOR

By a slender 52%-to-48% margin, Colorado voters on November 1 passed Referendum C, suspending the state’s Taxpayer’s Bill of Rights (TABOR) for five years.

The vote delivers a strong but non-fatal blow to the nationwide effort to use TABOR as a measure to constrain government. For Coloradans, the consequences will be terrible: Over five years the state government will be able to retain $3.7 billion more of citizens’ money.

TABOR was enacted in Colorado in 1992 and quickly became the nation’s leading state spending limitation. Colorado’s TABOR includes a requirement of voter approval before higher state or local taxes or debts may be enacted, a ban on local income taxes and state property taxes, a flat-rate income tax, emergency reserves and comprehensive state and local spending limits tied to inflation increases and population growth. Any surplus revenues must be returned to taxpayers.

The forces lobbying for Referendum C spent $4.4 million in just over three months, swamping the resources spent by taxpayer groups and others opposed to the measure. Just as they did in the early 1990s during the fight to enact TABOR, supporters of Referendum C used scare tactics—arguing that rejection of the referendum would lead to draconian cuts in public services, a destruction of the Colorado economy, etc.

Contrary to the claims of TABOR opponents, during the time it has been in operation, the measure has greatly enhanced the state’s economic and fiscal well-being:

  • TABOR has enabled Colorado to lead the nation in cutting taxes. From 1997 to 2001, TABOR returned $3.25 billion to taxpayers (about $3,200 for a family of four).
  • Colorado has not passed a single tax increase at the state level since enacting TABOR.
  • Between 1995 and 2000, Colorado was first in the nation in growth of gross state product, and second in personal income growth.

Split Decision

 Inspired by Colorado, 26 states have enacted some variant of a Tax and Expenditure Limitation (TEL). More than a dozen states incorporate voter approval or legislative “supermajority” mechanisms in their tax policies.

Roughly two dozen states limit all or part of their budget increases to economic measurements such as inflation or personal income growth.

Many more states are now weighing the benefits of enacting the full array of protections embodied in TABOR. The Colorado election results will no doubt hurt these efforts as anti-TABOR forces will trumpet that Colorado voters turned TABOR aside.

There was a bit of good news in the Colorado vote, however. A companion measure (Referendum D) asking for $2.1 billion in new bonding authority was defeated. Although that makes the vote something of a split decision, Referendum C was the more important measure.

The fight for TABOR will continue across the country. And in Colorado, activists will now have to make sure that the five-year suspension isn’t made permanent, as many in the political class would prefer.