In The Know: State Refunds

Over the last two years, Colorado lawmakers have restructured the way that revenue above the state’s spending cap has been sent to Coloradans. In the past, the amount in these “rebates” have been based on income, so that the more money one makes, the larger amount they receive. However, the state legislature decided that in 2022 and 2023 every Colorado taxpayer should receive the same amount. This has created more fairness. But why is this money available and how is it calculated? 

Under existing law, the top 7 percent of taxpayers (those making $246,000 and above) were set to receive more than 15 percent of the total amount going back to Colorado taxpayers.

Under the state Constitution’s TABOR Amendment, the state may spend only a certain amount of tax revenue it receives. Money that comes in over the limit must be returned to taxpayers, according to a legislative formula.

In the 2023 special session, state lawmakers passed SB23B-003, which restructured rebates so that 62 percent of Coloradans – those making $104,000 or less – would receive a larger check than they would have without the legislation.

Key Context

  • TABOR’s arbitrary definition of “surplus” ignores real and growing needs for services, creating and exacerbating unmet needs.
  • State budget experts have reported that Colorado will not have the revenue to maintain even current levels of services in just a few years. TABOR rebates will eat away at current community investments soon. This will be the case even if TABOR “surpluses” diminish, as expected.
  • This past year, state lawmakers took steps to structure the refunds to be more fair, benefiting lower- and middle-income Coloradans. While that is an improvement over the status quo, lawmakers and advocates are working to find out if there are better ways to use the money that is over the spending cap, and in ways that align with the state constitution. That could mean targeted tax credits to Coloradans struggling to make ends meet or fairer rebate structures to ensure that dollars are not going to the already wealthy in a disproportionate way.