TABOR refunds would become an income tax cut under Colorado law. • Colorado Newsline

Colorado’s income tax rate could be reduced in years when state revenues exceed a constitutional limit, under a bipartisan bill lawmakers are considering during the final week of the state’s legislative session.

The bill considers a Taxpayer’s Bill of Rights reimbursement mechanism that would reduce the state sales tax if the surplus exceeds $1.5 billion, and the individual income tax rate if the surplus exceeds $300 million, after the state implements local governments has reimbursed for property tax exemptions. These sales and income tax mechanisms would remain in place until the 2034-2035 fiscal year.

“This will allow people to see the savings on every purchase they make during the fiscal year and efficiently provide relief to people throughout the year instead of a one-time check,” said Senate Minority Leader Paul Lundeen, a Monument Republican. , during the Thursday afternoon of the bill. committee hearing.

Under TABOR’s constitutional amendment, the state must return money to taxpayers when revenues exceed an amount determined by population growth and inflation. This fiscal year, the surplus is estimated to be about $2 billion, which will be repaid in the next fiscal cycle. The state has a handful of ways to return the money, including a tiered sales tax, property tax exemptions and, most recently, equal checks for every taxpayer.

Colorado currently has an income tax rate of 4.4%, but under the bill, the 2024 tax year, which begins July 1, would have a rate of 4.25%.

Senate Bill 24-228 proposes larger income tax cuts with larger TABOR surpluses:

• A 0.04% reduction in years when the surplus is between $300 million and $500 million
• A 0.07% discount on years when the surplus is between $500 million and $600 million
• A 0.09% reduction in years when the surplus is between $600 million and $700 million
• A 0.11% reduction in years when the surplus is between $700 million and $800 million
• A 0.12% reduction in years when the surplus is between $800 million and $1 billion
• A 0.13% reduction in years when the surplus is between $1 billion and $1.5 billion
• A 0.15% reduction in years when the surplus is greater than $1.5 billion

The state’s 2.9% sales tax would be reduced for one year to 2.77% if the surplus is expected to rise above $1.5 billion during the state’s economic forecast in March.

Heidi Humphreys, head of the state’s Department of Finance, praised the bill Thursday, saying the proposed reimbursement mechanisms would “return money to taxpayers more efficiently and smooth out state revenues.”

Gov. Jared Polis has repeatedly expressed support for income tax cuts, including in his State of the State address earlier this year.

The bill passed the committee unanimously on Thursday and now heads to the Senate Appropriations Committee. It is sponsored by Lundeen and Senate Democratic Sen. Kyle Mullica of Thornton and by Democratic Rep. Chris deGruy Kennedy of Lakewood and Republican Minority Leader Rose Pugliese of Colorado Springs.

The legislature ends on May 8.