A new legislative proposal in Colorado, Senate Bill 24-228 (SB24-228), could potentially change the way residents receive their Taxpayer’s Bill of Rights (TABOR) refunds.
Introduced by Governor Jared Polis and other state lawmakers, the bill aims to reshape Colorado’s financial landscape by altering how surplus tax revenues are managed.
TABOR Refunds Explained
Currently, the TABOR law requires the state to return excess revenue to taxpayers, often in the form of refunds up to $1,600 for joint filers. This law is designed to limit government growth by ensuring that any revenue collected above voter-approved limits is returned to the people.
Coloradans who have lived in the state for at least a year and have filed their taxes on time are typically eligible for these refunds. However, factors like outstanding state tax debts or significant jail time in the previous year can disqualify a resident from receiving their refund.
Proposed Changes Under SB24-228
The proposed SB24-228 introduces a major change in how these refunds are distributed. Instead of issuing automatic annual refunds, the bill suggests that these rebates only be distributed if the state’s budget surplus exceeds $1.5 billion.
If this threshold is met, the bill proposes a 0.15 percent reduction in Colorado’s income tax rate, potentially lowering it from 4.4 percent to 4.25 percent starting in the 2024 tax year.
This approach aims to link tax reductions directly to the state’s revenue surplus, offering financial relief to residents when the state experiences significant surplus revenue.
Potential Impact on Income and Sales Tax
Beyond income tax, SB24-228 also proposes reducing sales and use tax rates by 0.13 percent if the surplus surpasses the $1.5 billion mark.
This reflects a broader strategy to provide financial relief to residents in response to ongoing economic challenges, such as high inflation rates.
The Bigger Picture: Financial Strategy
The shift in policy under SB24-228 is part of a larger trend among states reassessing how they utilize surplus tax revenues and federal pandemic relief funds. Supporters argue that lowering tax rates rather than issuing refunds is a more efficient use of the state’s surplus.
They believe this approach could make Colorado more competitive, attracting new businesses and residents. Governor Polis has emphasized that these proposed tax cuts would enhance the state’s appeal while still adhering to TABOR principles.
Looking to the Future
If SB24-228 is enacted, the changes would take effect from 2025 to 2035, significantly altering how Colorado manages its surplus revenue. While the bill’s supporters see it as a way to offer consistent tax relief, it also means that residents might not receive the same level of direct refunds as in the past.
As Colorado considers these potential changes, residents should stay informed about how this legislation could affect their finances in the coming years.
Conclusion
The ongoing debate over SB24-228 underscores the challenges of balancing immediate financial relief with long-term economic stability. Colorado taxpayers will need to keep a close eye on how this bill progresses and what it could mean for their future tax refunds and overall financial well-being.
Q1. What is the TABOR refund?
A. The TABOR refund is a rebate provided to Colorado taxpayers when the state’s revenue exceeds voter-approved limits, often up to $1,600 for joint filers.
Q2. How will SB24-228 change the TABOR refund?
A. SB24-228 proposes that TABOR refunds only be issued if the state’s surplus exceeds $1.5 billion and suggests reducing the income tax rate instead of providing automatic refunds.
Q3. Who is eligible for the TABOR refund?
A. Colorado residents who have lived in the state for at least a year and filed their taxes on time are eligible, though factors like state tax debts or significant jail time could disqualify them.
Q4. How will the income tax rate be affected by SB24-228?
A. If the state’s surplus exceeds $1.5 billion, the income tax rate could decrease from 4.4 percent to 4.25 percent.
Q5. Will sales taxes also be affected by SB24-228?
A. Yes, the bill proposes a 0.13 percent reduction in sales and use tax rates if the surplus surpasses $1.5 billion.
