DENVER — Colorado taxpayers who grew accustomed to receiving $750 or $800 TABOR refund checks will see those payments collapse to as little as $20 for single filers and $40 for joint filers when they file their 2025 tax returns this spring. The following year, there will be no refund at all. The dramatic decline marks the end of a three-year stretch in which the state returned over $8.5 billion to taxpayers, and it has reignited a debate about whether the Taxpayer’s Bill of Rights is being quietly dismantled through the tax code.
The drop is not an accident. State lawmakers in 2024 created and expanded targeted tax credits, including the Family Affordability Tax Credit and an expanded Earned Income Tax Credit, that draw from the same TABOR surplus pool. Those credits provided over $1.2 billion to qualifying taxpayers in 2024. The more money paid through targeted credits, the less remains for the general refund that goes to every filer.
Now Democratic lawmakers, backed by the Colorado Education Association, are considering asking voters in November to raise the TABOR spending cap by approximately $4.5 billion, the equivalent of the entire K-12 general fund budget. If approved, the legislature would gain permanent access to surplus revenue that currently must be refunded.
TABOR, formally Article X, Section 20 of the Colorado Constitution, was approved by voters in 1992 with 54% support. Written by Douglas Bruce after two failed attempts in 1988 and 1990, it limits annual growth in state revenue to the rate of inflation plus population growth. Any revenue collected above that cap must be refunded to taxpayers unless voters explicitly approve keeping it. Colorado is the only state with a constitutional TABOR; similar proposals have reached ballots in at least five other states and all were rejected.
The TABOR cap for 2025 allowed 3.7% revenue growth, calculated from 2.3% inflation plus 1.4% population growth. When actual collections exceed that cap, the surplus is returned through mechanisms set by the legislature: income tax rate reductions, sales tax refunds, or flat checks.
The Colorado Department of Revenue administers the refund process. In recent years, lawmakers have used several different refund mechanisms. In 2023, they sent flat $750 checks to every filer via SB22-233. In 2024, flat $800 checks went out through SB23B-003. For the 2024 tax year, SB24-228 restructured the refund into a temporary income tax rate reduction from 4.40% to 4.25% plus a six-tier, income-based sales tax refund ranging from $177 to $565 per single filer.
The state controller certified a TABOR surplus of $296.1 million for fiscal year 2024-25, according to FOX31 Denver. After correcting for a $2.7 million overrefund from the prior year, the total available for refunds is $293.3 million.
That figure is dramatically smaller than the surpluses of the preceding three years, during which $8.5 billion was returned to taxpayers, according to the Colorado Fiscal Institute, a nonprofit whose stated mission is “to advance equity-focused fiscal and economic policies that support working families and dismantle structural barriers to shared wealth and power in Colorado.”
The 2026 refund will arrive as a modest income tax rate reduction from 4.40% to 4.36% plus a sales tax refund. Single filers will receive between $20 and $62 depending on income. Joint filers will receive between $40 and $124, as reported by CPR News. For a median earner making approximately $50,000, the refund works out to about $47, according to the Colorado Fiscal Institute.
By comparison, single filers received between $177 and $565 in the prior year.
Two factors explain the decline: new tax credits consuming the surplus and reduced state revenue from federal tax changes.
The largest factor is the creation and expansion of targeted tax credits. In 2024, the legislature passed HB 24-1311, creating the Family Affordability Tax Credit, and HB 24-1134, expanding the state’s Earned Income Tax Credit to match 50% of the federal credit. Together, these credits provided over $1.2 billion to qualifying taxpayers in 2024, according to The Denver Post.
Because Colorado’s TABOR refund mechanism distributes the surplus, money paid through FATC and the expanded EITC reduces the pool available for general refunds. CPR News reported that these new credits are a primary reason refunds are shrinking.
The FATC provides up to $3,273 per child under age 6 and up to $2,455 per child ages 6 through 16 for families earning up to $85,000 (single) or $96,000 (joint). Nearly 300,000 filers qualified in 2024, receiving an average of $2,700. The expanded EITC reached over 330,000 filers at an average of $1,191.
The second factor is the federal budget bill known as H.R. 1, signed into law in 2025. Because Colorado’s tax code mirrors federal law, federal tax breaks for individuals and businesses reduced Colorado’s state revenue by an estimated $87 million, according to Colorado Politics. Gov. Polis blamed the federal bill for contributing to the revenue decline and warned of a tight fiscal outlook.
“This is a prudent proposal that reflects the current fiscal environment and the negative impacts that H.R. 1 imposes on Colorado while maintaining a budget reserve that will help insulate us from a heightened recession risk,” Gov. Polis said in January.
The combined effect is severe. For fiscal year 2025-26, revenue is projected to fall $308 million below the TABOR cap, according to the governor’s office. That means zero TABOR refunds for tax year 2026, the first time refunds have disappeared since the start of the pandemic.
Democrats and advocates argue the targeted credits deliver far more impact than small flat refunds ever could.
Research from Washington University and Appalachian State University found that Colorado’s expanded tax credits cut child poverty by 40.5%, giving the state the lowest rate of childhood poverty in the nation, according to The Denver Post.
“It’s disappointing to know we’re in this situation, when these credits… did have such a tremendous impact on low-income Coloradans,” Rep. Emily Sirota told The Denver Post.
The math, from a progressive standpoint, favors targeted credits. A median-income single filer receives roughly $47 in a general TABOR refund. A qualifying family with two children under 6 could receive over $6,500 through the FATC alone. Proponents argue that concentrating the surplus on low- and middle-income families addresses housing affordability and childhood poverty more effectively than distributing small flat amounts to all filers.
But the credits face a sustainability problem. Starting with 2027 tax filings, the EITC match will be reduced from 50% to 25%, and the FATC will shut off entirely due to budget constraints, The Denver Post reported.
Supporters of TABOR argue the shrinking refund is exactly the problem the amendment was designed to prevent: government finding ways to keep money that belongs to the people who earned it.
Jon Caldara, president of the Independence Institute, an organization that describes itself as “an action tank” promoting individual freedom, economic freedom, and journalistic freedom, has been the most vocal critic of the tax credit approach.
“What would you do if you bought a $15 item with a $20 bill and the cashier refused to give you back your $5 change?” Caldara wrote. He argues that “the meteoric increase in targeted tax breaks over the past few years drains the TABOR surplus by redirecting the revenue towards narrower and narrower interests,” according to an Independence Institute analysis.
“TABOR’s real crime is not shrinking government, because it doesn’t. It’s reminding government who it works for,” Caldara wrote in Colorado Politics.
Caldara contends that despite claims TABOR constrains government, Colorado’s state government has expanded substantially since the amendment passed. He cites General Fund spending up 44%, non-General Fund revenues (fees) up 588%, and federal spending by the state up 278% since the early 1990s. State government employment has increased 189% compared to 61% for the private sector, he wrote, arguing that two-thirds of state government now operates outside democratic control through enterprise fees and other TABOR-exempt mechanisms.
The Independence Institute argues the surplus should instead be used to buy down the income tax rate for all taxpayers, providing broad relief rather than funding credits targeted at specific populations.
Sen. Byron Pelton (R-Sterling) echoed that view in the legislature. “I don’t mind tax credits… But doing a tax holiday where you don’t have to pay taxes at all? That just helps families across the state,” Sen. Pelton told The Colorado Sun.
The debate over shrinking refunds has escalated into a push to fundamentally alter TABOR’s spending limit.
Democratic lawmakers and the Colorado Education Association, a teachers union that represents nearly 40,000 educators, are advancing a ballot measure for November 2026 that would raise the TABOR spending cap by the entire K-12 general fund budget, approximately $4.5 billion, as reported by Chalkbeat Colorado and The Colorado Sun.
The measure would prioritize increasing education spending by at least 2% annually, approximately $90 million in the first year. Proponents point to an estimated $3.5 to $4.1 billion gap between current education spending and adequate funding levels.
“We need to see some advancement and some improvement in our funding. Otherwise, we’re just going to be floundering like we have in these last few years,” Kevin Vick, president of the CEA, told Chalkbeat Colorado.
Sen. Jeff Bridges (D-Greenwood Village), vice chair of the Joint Budget Committee and a lead sponsor, framed the measure as necessary for stability. “We are fighting every year to just keep what we’ve been able to accomplish. This allows us to not only do that, but to continue to invest in our schools,” Sen. Bridges told Chalkbeat Colorado.
Democrats hold wide legislative majorities and need only a simple majority to refer the measure to the ballot. CEA polling shows 2-to-1 voter support for forgoing TABOR rebates to fund education.
But the proposal could also complicate the very tax credit strategy Democrats have favored. The Colorado Sun reported that if lawmakers gain the ability to grow the general fund through a raised cap, it could become harder to pass individual tax credits, because lawmakers would face a choice between directing surplus to credits or to general fund priorities like smaller class sizes.
“In that situation, you have to choose. Do we want to choose to have a bunch of one-off tax credits? Or do we want smaller class sizes, better paid teachers and students that are ready for Colorado’s workforce?” Sen. Bridges told The Colorado Sun.
Republican lawmakers reject the argument that Colorado has a revenue problem, contending the issue is spending growth.
“We’re not in a recession. It’s not like we have less revenues coming in,” Sen. Barbara Kirkmeyer (R-Weld) told Chalkbeat Colorado.
“It’s time for our colleagues across the aisle to quit placing blame on others, quit placing blame on TABOR, and to get down to work,” Sen. Kirkmeyer told The Colorado Sun.
Colorado voters have rejected previous attempts to alter TABOR’s refund structure. Proposition CC in 2019 would have allowed permanent retention of the surplus and failed 54% to 46%. Proposition HH in 2023 would have used the surplus for property tax relief and failed 60% to 40%. Those results suggest the electorate is skeptical of broad changes, though proponents note that voters have approved targeted uses of surplus revenue, including Proposition FF (school meals, 2022), Proposition 123 (affordable housing, 2022), and Proposition LL (school meal revenue retention, 2025).
One of the most unusual features of Colorado’s fiscal situation is that the state can run a budget surplus and a budget deficit simultaneously.
“Colorado is running a budget deficit and a budget surplus at the same time,” the Colorado Fiscal Institute explained. The TABOR surplus exists because revenue exceeded the constitutional cap. The budget deficit exists because the cost of government services grows faster than the cap allows revenue to grow.
The TABOR cap permits revenue growth of approximately 3.7% per year. But spending on programs like Medicaid and the Child Health Plan Plus needed to increase by 6% to 7% each year, according to the Colorado Fiscal Institute. That structural gap means the state can collect more money than TABOR allows it to keep while still lacking the funds to maintain existing services.
For fiscal year 2025-26, the state faces an $850 million budget shortfall while simultaneously collecting revenue that in prior years would have generated a surplus. Over $1 billion was trimmed in the 2025 legislative session, and an August 2025 special session generated approximately $150 million by eliminating business tax breaks, according to The Colorado Sun.
The Bell Policy Center, a nonprofit research and advocacy organization that describes its mission as ensuring “economic mobility for every Coloradan”, argues TABOR is the most restrictive tax and spending limit in the nation and prevents the state from responding to changing economic conditions. The center notes that Colorado families earning under $156,000 annually pay a larger percentage of income in taxes than wealthier residents, in part because TABOR prohibits a graduated income tax.
The 2026 legislative session includes several new tax credit proposals that would further draw from any future TABOR surplus: HB26-1048 (a back-to-school sales tax holiday), SB26-029 (income tax credit for health savings account contributions), HB26-1014 (a business tax credit for job creation), HB26-1015 (a tax credit for contributions to homelessness reduction projects), and HB26-1065 (a housing development near transit incentive), according to The Colorado Sun.
State economists project that TABOR refunds will return at modest levels in fiscal year 2026-27, with a projected surplus of $208.2 million generating refunds of roughly $47 to $300 per filer. Continued modest growth is expected in subsequent years.
But if voters approve the ballot measure to raise the TABOR cap, those future surpluses could be absorbed into the general fund rather than returned. The measure remains “in flux,” according to Chalkbeat Colorado, and its details could change significantly before it reaches voters.
A separate citizen-initiated measure from the Protect Colorado’s Future coalition, which includes the Bell Policy Center, would replace the flat income tax with a graduated structure, lowering taxes for 98% of Coloradans while raising rates on incomes above $500,000. Eight versions have been approved by the Title Board, though funding for signature collection remains unclear.
The fundamental question facing Colorado voters in November is whether TABOR’s refund mechanism should continue operating as designed, returning surplus revenue to the people who paid it, or whether the state’s structural budget constraints justify giving the legislature permanent access to that money.
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