The Colorado flag hangs in the state Capitol building on June 12, 2020. (Andy Bosselman for Newsline)
Colorado taxpayers are due for a refund from the government, thanks to a constitutional restriction on how much state revenue can increase each year.
State taxpayers who filed single returns will receive a sales tax refund of approximately $69 on average, while those filing joint returns can expect an average refund of $166, according to estimates from the Governor’s Office of State Planning and Budgeting.
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The Colorado economy’s quick recovery from 2020’s pandemic-induced downturn will also trigger a temporary income tax cut, from 4.55% to 4.5%, Gov. Jared Polis said in an emailed statement.
“These tax cuts and refunds are a strong sign that Colorado’s economy is roaring back,” said Polis, a Democrat who recently made headlines for saying the state income tax “should be zero.”
“I’m excited that Coloradans will get another income tax cut and refund that Coloradans can put toward bouncing back from the pandemic, a night out, or groceries,” Polis continued.
The temporary tax cut and refund announced this week result from an annual revenue limit required under the Taxpayer’s Bill of Rights, or TABOR, a constitutional amendment that voters approved in 1992. Under TABOR, the state can only retain and spend an amount equal to the previous year’s revenue or TABOR spending limit, whichever is lower.
The annual revenue limit — often called the “TABOR cap” or “Referendum C cap” — also makes adjustments for the state’s population growth and inflation, and takes into account any voter-approved tax increases.
According to a Sept. 1 report from State Controller Robert Jaros, the state collected 8.2% more revenue subject to TABOR in fiscal year 2020-2021, which ended June 30, than in fiscal year 2019-2020.
The allowable revenue growth rate under TABOR was just 3.1% — taking into account a population growth of 1.2% and an inflation rate of 1.9%. That means the state owes taxpayers approximately $454 million from last fiscal year, according to the controller’s report, which is based on preliminary calculations that could be adjusted later.
The last time voters received a TABOR refund, which came in the form of a tax cut, was in 2019, when the state’s economic growth triggered a temporary income tax decrease from 4.63% to 4.5%.
In November 2020, Colorado voters passed a ballot measure reducing the state income tax rate from 4.63% to 4.55%.
The projected tax refund for 2021 is the largest in 20 years.
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