A group of Colorado lawmakers has unveiled a plan to fundamentally change state tax policy and attempt to eliminate the Taxpayer’s Bill of Rights, or TABOR.
The plan, announced Monday afternoon by Democratic legislators, includes reclassifying chunks of Colorado highway funding so it doesn’t fall under the TABOR spending cap, which would free up money for other things. They also hope to end Colorado’s flat income tax and replace it with a system in which higher-income taxpayers pay higher rates than low-income filers.
Lawmakers also introduced a resolution Monday that seeks to launch a lawsuit challenging the legality of TABOR, which was passed by Colorado voters in 1992, under the U.S. Constitution.
“The state is coming to a reckoning on whether we can sustain ourselves,” said Sean Camacho, a Denver Democrat. “And all of these measures are critical to figuring that out.”
The lawsuit resolution has attracted a roster of co-sponsors, including some top legislative leaders. The proposals come as Colorado faces a budget hole of more than $1 billion because of the cap set by TABOR.
TABOR limits how much state spending can grow based on inflation and population growth. Certain sectors of government spending, chiefly mandatory Medicaid costs, have far outstripped the pace of consumer inflation, effectively eating into how much the state can spend on nonmandatory programs.
Some of the new proposals have already been introduced, while others are planned for introduction later this week. The resolution introduced Monday would direct the legislature’s committee on legal services to file a lawsuit on behalf of the General Assembly to challenge TABOR’s constitutionality.
Another bill in the package, Senate Bill 173, has already cleared one chamber; it would reclassify state revenue so it wouldn’t count under TABOR’s cap. A third — House Bill 1296, which makes various changes to a series of tax credits — was introduced in early March.
The proposals related to eliminating the flat income tax and replacing it with a graduated system have not yet been introduced. The graduated income tax would slightly decrease the taxes paid by those making less than $1 million a year, according to an analysis from the liberal Bell Policy Center. Filers reporting between $1 million and $2 million in income would see their taxes rise by about $21,000, while filers reporting between $2 million and $5 million would see their taxes increase by about $103,000.
The proposal would drop the state income tax to 4.2% for filers reporting less than $100,000 per year and leave it unchanged, at 4.4%, for filers reporting less than $750,000 per year, according to Bell’s analysis. Income between $750,000 and $1 million would be taxed at a rate of 8.5%, while income over $1 million would be taxed at 9.5%.
Besides Camacho, Reps. Lorena Garcia and Yara Zokaie are spearheading the broader effort, along with Sen. Mike Weissman in the Senate.
The lawsuit resolution would need to pass with a simple majority vote in both chambers. Camacho said the litigation would challenge TABOR on the basis that it constricts the state’s republican form of government from carrying out its duties.
He said the theory has not been tested in court yet.
Before being elected to office, Camacho served on a legal team challenging the constitutionality of TABOR, but it was thrown out over a legal standing issue, he said. That attempt to invalidate TABOR ended in 2021, after a decade-long legal fight. Gov. Jared Polis and Attorney General Phil Weiser both defended TABOR at the time.
A Polis spokeswoman, Shelby Wieman, didn’t comment directly on the proposals but noted his past support of income tax reductions, including signing a bill that reduced the rate to 4.25% for 2024. He also has broadly supported TABOR.
“While we are unaware of any such (new) proposal, the Governor has always supported lowering the income tax for everyone,” Wieman said.
Zokaie and Camacho both said TABOR constraints had been rising as an issue for their voters. Constituents at town halls frequently ask what the state can do to better fund education or roads, Zokaie said — and for Zokaie, the answer is that TABOR means the state can’t.
“The truth is TABOR has a chokehold on our state, and we need to find ways to work around it,” said Zokaie, a Fort Collins tax attorney.
Talks of reforming TABOR by Democratic leaders have been bubbling up throughout the legislative session. Speaker Julie McCluskie, a Dillon Democrat, floated the idea of pausing the spending cap and resetting it, like voters did with Referendum C in 2005.
Others have discussed carving out specific programs, such as education or Medicaid, from the TABOR cap.
House leadership did not immediately respond to a request for comment made through a spokesman early Monday evening. The lawsuit resolution is co-sponsored by 31 House Democrats, including most of the chamber’s leadership (though not McCluskie).
“Have you seen the budget?” Garcia, of Adams County, responded when asked about the need for the bills. “We need TABOR reform because it has been 30 years — longer than 30 years — and our tax policy has not kept up with the times today.”
Any changes to TABOR or state tax policy would need a vote by the people — unless the lawmaker-led challenge to TABOR in court succeeds.
Republicans have already dug in to oppose any changes to TABOR.
Sen. Barbara Kirkmeyer, a Brighton Republican who sits on the powerful Joint Budget Committee, has repeatedly argued the state has a spending problem it needs to rein in – not a problem created by TABOR.
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