Residents of Colorado should be aware of a proposed bill that could significantly alter how they receive their Taxpayer’s Bill of Rights (TABOR) refunds, which currently can be as much as $1,600 for joint filers.
Governor Jared Polis and other legislators have introduced SB24-228, a bill that seeks to adjust the state’s financial policies by reducing income and sales tax rates rather than providing automatic annual refunds.
If passed, this legislation would end the automatic distribution of TABOR refunds, limiting rebates to years when Colorado’s budget surplus is exceptionally high.
Specifically, if the budget surplus surpasses $1.5 billion, the income tax rate would decrease by 0.15 percent, effectively linking tax reductions to the state’s revenue performance.
Governor Polis stated, “The income tax rate will be reduced from 4.4 to 4.25% (for tax year 2024), as long as our economy remains strong, and that will make Colorado more competitive.”
Returning Excess Revenue to Taxpayers
Currently, TABOR refunds are issued to Colorado residents who have lived in the state for at least a year, filed their taxes on time, and do not have outstanding state tax liabilities or significant jail time in the previous fiscal year.
This system was established to return excess revenue to taxpayers, ensuring that government growth is limited by voter-approved revenue caps.
However, if SB24-228 is enacted, from 2025 to 2035, any reductions in income tax rates would be dependent on revenue exceeding these TABOR limits, after accounting for certain exemptions, such as those for senior homeowners.
Additionally, when the surplus reaches $1.5 billion, not only could income taxes be reduced, but sales and use tax rates might also be decreased by 0.13 percent.
This proposal is part of a broader effort to use state surpluses to provide relief to residents in light of ongoing economic challenges, such as inflation rates remaining above three percent.
It reflects a trend seen in several states, which are exploring how to best utilize federal pandemic relief funds and surplus tax revenues to offer financial assistance to their citizens.
