Taxpayer Bill of Rights

The Taxpayer Bill of Rights (abbreviated TABOR) is a concept advocated by conservative and free market libertarian groups, primarily in the United States, as a way of limiting the growth of government. It is not a charter of rights but a provision requiring that increases in overall tax revenue be tied to inflation and population increases unless larger increases are approved by referendum.

In 1992, the voters of the state approved a measure which amended Article X of the Colorado Constitution that restricts revenues for all levels of government (state, local, and schools). Under TABOR, state and local governments cannot raise tax rates without voter approval and cannot spend revenues collected under existing tax rates without voter approval if revenues grow faster than the rate of inflation and population growth. Revenue in excess of the TABOR limit, commonly referred to as the "TABOR surplus", must be refunded to taxpayers, unless voters approve a revenue change as an offset in a referendum. Under TABOR, the state has returned more than $2 billion to taxpayers.

The allowance for spending to grow at the rate of inflation plus population growth means that inflation-adjusted per capita spending generally did not decrease. However, spending growth could be interrupted due to an economic recession, in which case inflation-adjusted per capita spending did decrease—and TABOR did not permit inflation-adjusted per capita spending to return to its pre-recession level. This was known as the "ratchet-down effect," and it occurred in FY2001-02 and FY2002-03. The ratchet-down effect was desirable to those who believed government was consuming too large a fraction of Colorado's gross state product (GSP), and undesirable to those who believed government was consuming too small a fraction of Colorado's GSP.

In November 2005, Coloradans approved Referendum C, a ballot measure that loosened many of TABOR's restrictions. This measure allows the state to retain and spend money from existing revenue sources above the TABOR limit each year beginning in FY 2005-06. The state may spend all revenue subject to TABOR for five years through FY 2009-10. Beginning in FY 2010-11, the state may spend revenue above the TABOR limit up to a capped amount known as the "Referendum C cap. The Referendum C cap grows from the prior year's cap instead of the prior year's spending by inflation plus population growth. In effect, Referendum C eliminated the ratchet-down effect.

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