TABOR: the rule behind your Colorado refund

TABOR stands for the Taxpayer’s Bill of Rights. It is Article X, Section 20 of the Colorado Constitution, added by voters on November 3, 1992, and it applies to the state and to every city, county, school district and special district in Colorado. Most people meet it once a year, on the income tax return, as a line called the state sales tax refund. The line is there some years and not others, and the amount changes from year to year. Understanding why takes a short tour through the rule itself and three decades of the state trying to live with it.

What TABOR says

Tax increases need a vote. No new tax, higher tax rate or new debt without approval from voters. The legislature can cut taxes on its own; it cannot raise them.

A cap on how much the state can keep. State revenue can grow each year only by inflation plus population growth. Federal money, gifts and a few other sources do not count toward the cap.

Anything over the cap goes back. Revenue above the cap must be refunded to taxpayers the next year, unless voters agree to let the state keep it. The legislature decides how to refund it, and it has used a lot of different ways.

One income tax rate. Any change to the income tax must tax all income at a single rate. That is why Colorado has a flat tax, and why the November 2026 Amendment 87 has to amend the constitution to create brackets.

No new real estate transfer taxes. New or higher taxes on the transfer of real property are banned, and there is no statewide property tax. Local property taxes still exist, but rate increases need a local vote.

“De-Brucing.” Local governments can ask voters to let them keep revenue above the cap. Colorado calls this de-Brucing, after TABOR’s author. Many Colorado cities, counties and school districts have done it; the state as a whole has not.

The man behind it: Douglas Bruce

Douglas Bruce was born in Los Angeles in 1949, worked as a Los Angeles County deputy district attorney in the 1970s, and became a landlord. He moved to Colorado Springs in 1986 and turned his attention to limiting government taxing and spending.

His idea did not pass the first time, or the second. His measure won 42% of the vote in 1988. A revised version won 49% in 1990. The third try, Amendment 1, passed on November 3, 1992, with just over 53% of the vote, and became part of the constitution.

Bruce later served one year in the Colorado House (2008), where he was censured for kicking a newspaper photographer on the day he was sworn in. In 2011 he was convicted of tax evasion, money laundering and related charges and served jail time. His amendment has outlasted all of it: more than three decades later, it is still the most important rule in Colorado public finance, and his name lives on in “de-Brucing.”

Three decades in a timeline

Ballotpedia counts 36 statewide TABOR-related measures from 1993 to 2023; voters rejected about 69% of them.

Referendum C and the ratchet

The recession of 2001 to 2003 exposed a feature of the cap that its drafters may not have intended. The cap grows each year from the prior year’s revenue, so when revenue fell, the cap fell with it. When the economy recovered, the state could not climb back to its old spending level; it was stuck growing from the low point. Colorado calls this the ratchet effect.

In 2005 voters approved Referendum C, the one large TABOR measure that has passed. It gave the state a five-year timeout in which it kept everything it collected, and a permanently higher cap after that. Through fiscal 2022–23 the state kept about $33.75 billion that it would otherwise have refunded, and spent it on health care, schools, higher education and transportation. Referendum C is the reason refunds disappeared for a stretch of years and the reason the cap is where it is today.

How the refund shows up on your return

TABOR says the money goes back. The legislature decides how, and over thirty years it has used five different methods, sometimes more than one in the same year.

Six-tier sales tax refund. The most common method. Everyone who files gets a refund, and people with more income get more, in six income tiers. It is called a sales tax refund, but it is claimed on the income tax return.

Same amount for everyone. Used in big years: the $750 Cash Back checks in 2022 and the $800 refund on 2023 returns. Also used automatically when the refund would be very small.

A temporary rate cut. The income tax rate drops for one year: 4.63% to 4.50% for 2019, and 4.40% to 4.25% for 2024. Everyone who pays income tax benefits, in proportion to income.

Credits and deductions that switch on. In the late 1990s the refund came partly through special credits and subtractions that only applied in surplus years: the earned income credit, a child care credit, deductions for capital gains and interest, and the charitable subtraction. Some of those became permanent.

Senior and veteran property tax exemption. Before anyone gets a check, the state reimburses counties for the homestead exemption that cuts property taxes for seniors and disabled veterans. In a small surplus year that takes most of the money, which is why the 2025 refund was so small.

Things that surprise people

You have to file to get it. The refund goes to people who file a Colorado return, even if they had little or no income. In a refund year, filing can be worth hundreds of dollars to someone who would not otherwise need to.

It is not a refund of your tax. Someone who paid no Colorado income tax can still get the sales tax refund. It is a share of the state’s surplus, not money you overpaid, which is also why it does not appear on the Form 1099-G the state sends itemizers.

Two everyday breaks started as TABOR refunds. The state earned income credit and the subtraction for charitable gifts above $500 for people who do not itemize both began as temporary ways to pay out surpluses (1999 and 2000) and became permanent. See charitable giving over $300,000.

Your refund is not your neighbor’s. Under the six-tier method, a family with higher income gets a bigger sales tax refund on the theory that it spent more. Under the identical method, everyone gets the same. The method can change every year.

Where it stands in 2026

No refund on 2026 returns. Revenue for fiscal 2025–26 came in about $176 million under the cap. Forecasters expect surpluses, and refunds, to return on 2027 returns.

On the November ballot. Proposition NN would let the state keep about $500 million more in its first year for schools. Amendment 87 would replace the flat tax with brackets, which means changing TABOR’s single-rate rule. Details on what changed in Colorado for 2026.

Paying back an over-refund. HB26-1419 recovers refunds that turned out too large for 2024–25 by shrinking future refunds. A legal challenge is expected.