Support adequate and flexible funding of state government programs through an equitable tax system that is progressive and which incorporates social, environmental and economic goals. Oppose earmarking of funds and sales tax on food.

POSITION: (Adopted 1979-1981)


  • Support a system to raise revenue which incorporates social, environmental and economic goals.
  • Support the use of the following criteria for evaluating Colorado revenue structure: ability to pay, equitable, certain, convenient, economical and flexible. Also adequate, reliable, elastic, diverse and simple.
  • Support for a progressive state income tax, individual and corporate.
  • Support for state revenue from the severance tax.
  • Support of a raise in taxes and/or elimination, reduction or shift of funding from other programs when revenues are insufficient to finance a League supported program.
  • Oppose a sales tax on food.
  • Earmarking funds is necessary in some cases but should be used on a limited basis and with discretion.

Budget and Expenditures:

The following concepts should be included in the state of Colorado’s budget building process:

  • A three year budget cycle.
  • Consideration of fiscal consequences of alternative future policies and funding.
  • Development of spending priorities.
  • Long range planning.

The budget-building process should be carried out within the constitutional framework of a dynamic balance between the executive and legislative branches of government. The budget process should incorporate significant participation by the executive branch and cooperation between the executive and legislative branches.

Capital Development:

The following options for funding capital investments should be available to the state of Colorado:

  • Debt financing – support for revenue bonds without the need for a vote because existing revenue is already in place for funding such bonds.
  • Debt financing – support for general obligation debt funding, provided that these conditions are met:
    • a vote of the citizens on bond issues be required;
    • a statutory limit be placed on the amount that can be raised by such a method; and
    • the use of general obligation bond funding be limited to capital investments. (Debt financing would require a constitutional change.)
  • Changes in the tax structure at the state or local level.
  • Creation of special funds.
  • An annual state capital budget and appropriation bill.


Assessors should be appointed rather than elected. Professional qualifications for assessors should be established by the state. The state should control property tax assessment by requiring training for assessors and their staffs, enforcing equalized assessments throughout the state and by adopting measures to decrease the time between completion of building construction and liability for taxes.


From 1977 through 1979, LWVCO studied “The Money Exchange: Study of Revenue Sources and their Effects on the Taxpayer.” From 1979 through 1981, LWV expanded the Fiscal study to include “A Study of Colorado Revenue Structure: Expenditures, including services, budgeting and spending.” Over the years the position has been updated as needed.

Budget: Each year the League analyzes and comments on the state budget. We have neither supported nor opposed the budget since 1986. The passage of TABOR and Amendment 23 on K-12 spending, combined with difficult economies since 2000, have so limited the flexibility of the Joint Budget Committee that there is little discretion. Our focus has been on ways to return flexibility to the legislature in making the budget and to find sources of revenue to meet the needs of the state.

Capital Development: In 1981 the League supported legislation to establish a capital needs fund and an administering committee that would prioritize the need to build and maintain state-owned facilities. The Capital Development Committee was established in 1985. The intention was to have long-range planning for capital construction and controlled maintenance. The budget constraints resulting from TABOR and poor economies in the period from 2000-2012 have reduced the ability of that committee to meet its goals.

Earmarking of Taxes: In general the League opposes earmarking of tax receipts because doing so limits the ability of elected representatives to do their jobs. However, the post-TABOR environment has often made earmarking the only way to gain popular support for revenue enhancements. The League has continued to oppose earmarking of TABOR surplus funds, but has been lenient in support of tax increase proposals that have appeared on the ballot. We have supported some tax increases where the revenue was designated for a related purpose, such as the increased cigarette tax whose revenue was used for health care. TABOR’s requirement that all tax increases be voted on, and the public’s appetite for taxes that are earmarked for specific purposes, challenge this position. However, we continue to believe that representative government means placing the responsibility for determining the use of funds with the people elected to do that job.

Food Sales Tax: The LWVCO has a strong position against sales tax on food. In 1980 the League successfully worked for the repeal of the state sales tax on food. In 1987 LWVCO successfully opposed the reintroduction of a sales tax on food for the purpose of funding two new prisons. In 1989 the same issue was proposed in a special session of the legislature and failed. In 1997 a bill was introduced to remove local sales tax on food, but because it did NOT allow for replacement revenue, it was defeated.

Fuel Taxes, Auto Registration Fees, Transportation:
In 1986 LWVCO supported a successful proposal to increase fuel taxes for the state’s transportation system. Again in 1988, the League supported the governor’s transportation bill designed to raise revenue for the construction of high priority highway projects. It failed. In 1996 and 1997 the League opposed earmarking of General Fund revenue for highways. The proposal passed in 1997. In 2009 the League supported the FASTER bill, increasing vehicle registration fees and penalties for late renewals. The funds were to be devoted to repairing bridges and overpasses. This earmarking was deemed reasonable because of the nexus between vehicles and roads. In 2010 and 2011 some of the penalties for late renewal were scaled back.

Tax Reform: LWVCO has supported simplified income tax codes that still require as many people as possible to participate in funding state needs, commensurate with ability. We have supported progressive taxation and opposed a flat tax. With the passage of the TABOR amendment, the constitution now requires a flat income tax.

In 2010 LWVCO supported Senate Joint Resolution 2, which requested that the University of Denver undertake a study of the financing of state and local government in Colorado, the first comprehensive study of Colorado’s tax system since 1959. The Center for Colorado’s Economic Future (CCEF) released the first phase of this study in April, 2011. Among the findings was recognition that Colorado’s revenue system no longer reflected the nature of its economic activity and, as a result, may not be as equitable as the system once was. The study also highlighted the fact that earmarking of revenue rendered the system inflexible in dealing with changing times. The experience of LWVCO as it evaluates the needs of the state and the ways to fund those needs mirrors the CCEF findings.

Tax and Spending Limits: LWVCO opposes constitutional amendments that restrict taxes and spending. These measures undermine the philosophy of representative government and impose severe restrictions that prevent an equitable and flexible system of taxation. They reduce the ability of elected officials to provide adequate funding for state and local government, schools, highways and public welfare programs. The passage of Article X, Section 20, of the Colorado Constitution (TABOR) imposed both revenue and spending limits on all levels of government. Since 1992 when that act was passed, many localities have voted to override the limitations on local tax collection and spending. The advocates for limits have responded with initiated constitutional amendments to reverse the effect of these votes and to further limit taxes and fees imposed for specific purposes. LWVCO has opposed these. None has been successful.

Revenue Reduction: Since the passage of Article X, Section 20 (TABOR), and because of its ramifications for both state and local governments, the League has carefully watched proposals that would reduce revenue. Although our analysis has consistently found that the Business Personal Property Tax harms job creation overall, eliminating it would reduce revenues to counties that might need to be backfilled by state funds, which have been greatly reduced by tax cuts.

In recent years, tax incentives (also called tax expenditures) have been used as tools of economic development and of assistance to the working poor. In 2011 LWVCO supported a successful bill (SB 184) to evaluate tax expenditures (tax credits and exemptions) that reduce tax revenues by giving special consideration, mostly to business. The Department of Revenue has published information about the amount of tax expenditures claimed in 2011. Total costs (for multi-year expenditures) and benefits are difficult to estimate and assess. Yet the reduction of tax revenues can be huge, and come when the state is least able to afford it. In 2015 League supported HB 1205 to create a Tax Expenditure Evaluation Committee. The bill was approved by House and Senate leadership before being killed by the Senate Appropriations Committee.

TABOR Surplus: TABOR mandates that surplus revenue over the allowable limit be refunded to the taxpayers. This sounds easier than it is, since determining who has paid how much “excess” revenue is difficult. Initially, refunds were made to specific special interests – primarily, but not exclusively, to help the less fortunate. However, in 1999 and 2000 both sales and income taxes were cut to avoid collecting excess revenue in the first place. Knowing that Colorado has a boom and bust economy, League strongly opposed making these tax cuts permanent, preferring cuts that had a time limit. The difficulties of the years 2001 to the present have shown the wisdom of temporary tax cuts, rather than permanent ones.

In 2004, despite a recovering economy, the increase in spending was limited to 4.4% over the prior year, making it impossible to restore significant spending cuts that hurt the poor, almost eliminated transportation spending, and required changes in the way that higher education was funded to avoid further TABOR-mandated cuts. This was a classic case of “ratcheting down.” Tax cuts of 1999 and 2000 set Colorado up for problems; the soft economy of 2001-2003 brought significant shortages; TABOR prevented recovery.

During the difficult years of the new century, League supported efforts to work within TABOR to gain more budget flexibility for the state. These included support for Referendum C in 2005 that repaired the ratchet-down effect, allowing spending and revenues to grow from the prior year’s spending limit, rather than from the prior year’s actual revenue. In 2015 we supported an unsuccessful bill to correct the classification of a revenue stream from a tax receipt (incorrect) to a fee (correct). The bill would have created an enterprise for the Hospital Provider Fee, removing that fee revenue from the TABOR base so as not to trigger refunds that require cutting of appropriations to higher education and the like. The effort will continue.

The Gordian Knot

Colorado’s fiscal situation suffers from a combination of revenue limits, spending mandates and spending limits. TABOR places spending limits (although relaxed as a result of Referendum C).

The spending mandates have come from two sources. First, Amendment 23, passed in 2000, caused increases in spending on K-12 education to keep up with inflation. Second was the Gallagher Amendment, passed in 1982, which caused residential property taxes to fall. The Gallagher Amendment divides the state’s total property tax burden between residential and nonresidential (commercial) property. According to the amendment, 45% of the total amount of state property tax collected must come from residential property and 55% from commercial property. As a result, in many counties where there is little commercial real estate, property tax revenues have fallen and school funding has been reduced. This has placed more burden on the state to support poorer counties to equalize per pupil spending. Tight budgets in 2008-2012 have caused K-12 education spending to be curtailed, possibly in violation of Amendment 23, although no legal challenges have yet been brought.

In 2009 the General Assembly passed SB 228, redefining the notions of “spending limits” that had been in place since the passage of TABOR. As a result, all revenue from income taxes, sales and use taxes and excise taxes can be used for the needs of the state without spending limit. SB 228 also builds a Rainy Day fund by earmarking 0.5% per year of the monies going to the General Fund until the fund reaches 8% of the General Fund. This is similar to the past, before TABOR and before the laws driving all “excess” General Fund money to transportation and capital construction. In good times, the fund fills up, and in down times, it can be drawn against. The League supported SB 228.

Although the changes from voters and interpretations of TABOR have returned some flexibility to fiscal management, Colorado is still mostly short of revenues for essential services, not only in bad times, but also in good ones.


In 1992 Colorado voters adopted an amendment to Article X, Section 20 of the State Constitution by a majority of 53.6%. Labeled by its author as the Taxpayers Bill of Rights (TABOR), the amendment dramatically changed the financial management practices of Colorado’s state and local governments by putting strict limitations on the amount of tax revenues and fees for services they can collect and spend.

What TABOR does

  • Makes all tax increases by all government units subject to approval by the voters, thus undermining the principles of representative government and local control.
  • Limits spending increases by all levels of government to inflation plus growth. Since passage, many municipalities have voted to override the limits on tax receipts and spending.
  • Originally limited growth in state’s General Fund spending to the amount of growth plus inflation over a base of the prior year’s spending. This prevented the state from recovering after a recession, effectively “ratcheting down” spending permanently. In 2005 voters in Colorado passed Referendum C, which eliminated the ratchet effect by allowing General Fund spending to grow from the prior year’s spending limit, rather than the prior year’s actual spending.
  • Caps property taxes, hurting local governments and school districts. Property taxes are among those whose caps have been removed in some political subdivisions.
  • Does not allow for changing economic conditions in the state.
  • Requires all levels of government to build emergency funds, but strictly limits how they can be spent and replaced.
  • Specifies that state income tax will be a flat percentage of federal adjusted gross income, making Colorado vulnerable to federal tax policy changes.

TABOR is long, complex, detailed and inflexible. As a result, the General Assembly has created convoluted “work-arounds” to meet the needs of the state. These have survived legal challenges.

The LWVCO opposed TABOR, campaigned against it, and worked unsuccessfully with a coalition to defeat the amendment.