Lawmakers Introduce New TABOR Refund Mechanism, Advance Tax Credits for Working Families

DENVER, CO – Lawmakers yesterday introduced legislation that will restructure the refund mechanisms for state revenue collected above the TABOR cap. 

The bipartisan bill will temporarily lower income tax rates and create a new formula to determine future refund amounts through the six-tier refund mechanism and income rate reductions, and sales and use tax reductions in years with higher surpluses. These steps ensure Colorado will meet its commitment to fund critical services and schools during a recession while furthering efforts to reduce child poverty and boost the incomes of hardworking people through the new Family Affordability Tax Credit and expanded Earned Income Tax Credit.

“Colorado is facing a choice; we can continue with our tax code that doesn’t benefit the majority of Coloradans, or we can boost the incomes of hardworking people, create a pro-family tax code, and cut child poverty in half,” said Speaker Pro Tempore Chris deGruy Kennedy, D-Lakewood. “This legislation, when combined with our Family Affordability Tax Credit and expanded Earned Income Tax Credit, will make our tax code more fair, boost the incomes of hardworking families and families with children, and cut child poverty in half in Colorado. I’m excited that we have found a way forward with Governor Polis to responsibly create new tax credits that benefit the majority of Coloradans and the people in our state that are feeling the brunt of our affordability crisis.”

"Making sure Colorado's tax code works for all Coloradans is one of my top priorities, which is why this bill, combined with our work to bolster critical tax credits that benefit working families, is so important,” Senator Kyle Mullica, D-Thornton, said. "Taken together, these measures will put more money into the pockets of working Colorado families, cut child poverty in half, and make it easier to make ends meet."

“I appreciate the work of so many organizations, lawmakers, and the governor who came together to create new tax credits that will cut child poverty, boost incomes for lower and middle-income people, and update our tax code so that it works for the majority of Coloradans, not just those at the top,” said Rep. Jenny Willford, D-Northglenn. “Colorado’s working families and children are counting on us to deliver meaningful tax relief, and I’m proud that we are going to deliver on this promise. The bill introduced today alongside our package of tax credits will make Colorado more affordable, put money back into the pockets of hardworking people, and help us forge a brighter future for millions of people who call our state home.”

“Looking out for Colorado families means making sure they don’t have to choose between putting food on the table and paying rent or affording other necessities,” said Senate Assistant Majority Leader Faith Winter, D-Broomfield. “It’s no understatement to say that this is one of the more impactful pieces of legislation we’re going to see this session. I am extremely pleased to be a part of making this package of tax credits possible, because it will cut child poverty in half while benefiting the majority of Coloradans and making it that much easier for working families to get by in our state.”

“Working Coloradans need our support, and I am pleased to say that we have an opportunity to make a real, transformative difference for kids and families,” said Senate President Pro Tempore James Coleman, D-Denver. “This package will provide direct relief for families in our community while making our tax code more equitable, and will help give every Colorado family the resources they need to thrive.”

SB24-228, sponsored by Mullica and Minority Leader Paul Lundeen, R-Monument, and Speaker Pro Tempore deGruy Kennedy and Minority Leader Rose Pugliese, R-Colorado Springs, will create a new refund mechanism and formula to distribute state revenue collected above the TABOR cap. 

The legislation is part of an effort from House and Senate Democrats to boost tax credits for hardworking people and families with children. Under these proposals, hundreds of millions in tax credits will go to middle and lower income families and will cut the child poverty rate in half. These proven-anti poverty measures will boost the incomes of the majority of Coloradans. 

For tax year 2024, income tax rates will be temporarily reduced from 4.40 percent to 4.25 percent. For years 2025 through 2035, the income tax rate cut is activated and will fluctuate based on the amount of state revenues expected to exceed the TABOR cap after accounting for reimbursements to counties for the senior homestead exemption. If the surplus exceeds $1.5 billion after the temporary rate reduction and reimbursements to counties, then a fourth refund mechanism will be activated that will reduce sales and use tax rates by 0.13 percent. 

Whether the refund mechanisms are triggered and which ones will be triggered will depend on the amount of state revenues in excess of the TABOR cap. 

• If remaining excess state revenues are less than or equal to $300 million, TABOR refunds are distributed only through the tiered or flat sales tax refund mechanism; 

• If remaining excess state revenues are greater than $300 million but less than or equal to $1.5 billion, TABOR refunds are distributed first through the income tax rate reduction and then through the tiered or flat sales tax refund mechanism; 

• And if remaining excess state revenues are greater than $1.5 billion, TABOR refunds are distributed first through the income tax rate reduction, next through the sales and use tax rate reduction, and finally through the tiered or flat sales tax refund mechanism.