TABOR refund: How much your refund will grow (or shrink)

Democrats are excited to spread the word about a program they’re calling the “Colorado Cashback,” which is set to send income taxpayers checks of $750 — joint filers will get $1,500 — starting in the coming weeks.

Their messaging on this program typically omits some critical details, including that the projected $2.74 billion they’ll use for these checks is part of a pool of money that the state Taxpayer’s Bill of Rights (TABOR) requires be refunded. Coloradans who aren’t educated about TABOR may not understand that the money isn’t exactly being sent to them by choice of their elected leaders.

But there’s something else largely missing from the political messaging: In order to send checks in equal amounts to all qualifying taxpayers, the legislature has actually taken quite a bit of money away from higher-income taxpayers, transferring more of the windfall from historically flush state coffers over to poorer people.

An updated fiscal analysis released Friday by nonpartisan staff for Colorado’s Joint Budget Committee shows that people with the highest incomes will each receive nearly $1,000 less than they otherwise would have as a result of the legislature’s recent, temporary change to how — and when — TABOR refunds are administered. Those earning the lowest wages, meanwhile, will see more than $200 more each, the fiscal analysis shows.

What to expect

TABOR requires that the state reimburse any tax revenues that come in above a cap set by an equation that factors in population growth plus inflation. (Many, especially on the left, believe this is an imperfect and flawed way to draw the line.) The state usually hasn’t eclipsed that cap, but in the 2021-22 fiscal year that wrapped at the end of June, Colorado took in far more of a TABOR surplus than ever before — more than $3.5 billion, in fact. The state will finalize numbers from last fiscal year this winter, though the current projected totals aren’t expected to change much.

The $3.5 billion will be returned to taxpayers in three ways: first, through one-time property tax relief for seniors and veterans; second, through a small, one-time cut to the state’s flat income tax rate; third, through the new and also one-time “cashback” program; and, finally, by running the money left over after the first three mechanisms through a six-tiered system that gives more money to higher earners and less to lower earners.

The first two mechanisms account for only a fraction of the state’s total TABOR refund obligation — the property tax relief is expected to cost about $161 million, while the temporary income tax cut will cover about $148 million. Had the Democrat-run legislature not passed Senate Bill 233 earlier this year, then there would be no “cashback” checks this year, and the vast majority of the billions that remained would be run through the six tiers.

In that alternate reality, the richest tier — that is, those earning at least $265,000 — would each get back about $2,000, plus whatever additional savings they might get from those first two mechanisms.

How the numbers break down

Nonpartisan state budget staff has tallied this one-time rich-to-poor transfer of tax money as follows. (These numbers do not account for any savings from the property tax relief or the income tax cut.)

Tier 1 (up to $47,000): This group comprises a plurality among the six tiers, as nonpartisan staff projects that about 35% of income taxpayers in Colorado earned under $47,000 last year. Single-filer members of this tier would have gotten back about $640 in refunds each, but now will each get back about $851 — $750 checks, plus about $100 because of remaining money that will be run through the typical six-tier formula. That’s an expected gain of $211 per person, or $422 for joint filers.
Tier 2 ($47,001 to $95,000): This is the second-largest group among the six tiers, covering about 27% of Colorado income taxpayers. Members of this group would have received about $853 each, and as a result of SB22-233, they’ll get about $885. That’s an expected gain of $32 per person, or $64 for joint filers.
Tier 3 ($95,001 to $150,000): This group, comprising an estimated 17% of Colorado income taxpayers, would have received $982 each before SB22-233, and will now receive about $905. That’s an expected loss of $77 per person, or $154 for joint filers.
Tier 4 ($150,001 to $208,000): The roughly 9% of Coloradans in this group would’ve been set to receive about $1,167 prior to SB22-233, but will now get about $935. That’s an expected loss of $232 per person, or $464 for joint filers.
Tier 5 ($208,001 to $265,000): This is the smallest group among the six tiers, covering an estimated 4% of Colorado income taxpayers. Members of this group would have received about $1,256 each, and now will instead receive about $949 each. That’s an expected loss of $307 per person, or $614 for joint filers.
Tier 6 ($265,000+): Members of this top income tier, which covers an estimated 7% of Colorado income taxpayers, would have been set to receive about $2,020 each, prior to SB22-233. They’re now expected to receive $1,069 each. That’s an expected loss of $951 per person, or $1,902 for joint filers.

The timing

One thing the Democrats who championed SB22-233 — it received Republican votes, but it was very much a Democratic project — can credibly claim credit for is moving the refund delivery up significantly. Absent legislative intervention, the tax refund money would not have reached people until next tax season. Now, because of SB22-233, the checks will go out much sooner. (The rest of the refund benefits, including any amounts left over, after the checks, to be run through the six-tier system, will go out next tax season as usual.) The state treasurer’s staff told The Denver Post that the checks began printing this week, and the governor’s office said that checks will hit the mail “in early to mid-August.” The governor’s office also said that for people filing their taxes late, up until Oct. 17, refund checks will be mailed in December or January.

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