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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. [1]
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). [2] 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. [2] 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. [3] Under TABOR, the state has returned more than $2 billion to taxpayers. [2] [4]
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 decreased—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. [3] The ratchet-down effect was desirable to those who believed government was consuming too large a fraction of Colorado's gross state product (GSP).
In November 2005, Coloradans approved Referendum C, a ballot measure that loosened many of TABOR's restrictions. This measure allowed the state to retain and spend money from existing revenue sources above the TABOR limit each year beginning in FY 2005–06 for five years through FY 2009–10. Beginning in FY 2010–11, the state was allowed to spend revenue above the TABOR limit up to a capped amount known as the "Referendum C cap. [3] The Referendum C cap grows from the prior year's cap instead of the prior year's spending by inflation plus population growth. [3] In effect, Referendum C eliminated the ratchet-down effect. [3]
Any retained Referendum C revenue (revenue above the allowable TABOR limit but below the Referendum C cap) is statutorily required to be spent on health care, education, firefighter and police retirement plans, and strategic transportation projects. [3] Colorado Legislative Council staff reported in 2009 that the state would have faced a significant budget shortfall had Referendum C not passed. [3] Therefore, in many instances the Referendum C money that has been spent is not new money to programs, rather it maintained the programs and prevented them from undergoing cuts. [3] It is money the programs may not have received without Referendum C, but it is not additional money when compared with prior years. [3] However, the report also admits that it is impossible to enumerate this impact because it would require knowledge of what budgetary actions the state would have taken had Referendum C failed. [3] Referendum C and other attempts to mitigate the effects of TABOR are referred to as "de-Brucing" after Douglas Bruce, the author of the amendment. The effects of TABOR on government spending and economic growth has been a popular discussion topic in recent years. Proponents accredit much of Colorado's economic prosperity in the period immediately following adoption of the law to the limit and its effect on government spending and taxes. [5] [6]
When Colorado voters passed the law that legalized marijuana, the voters approved using tax money generated from marijuana sales for schools, police, and drug education. As of April 2015, projections for marijuana tax revenue for Colorado were at $58 million, but it was unclear at that time whether the additional revenue would have to be returned to taxpayers due to the provisions in the state's Taxpayer Bill of Rights. [7] [ needs update ]
Douglas Bruce is a conservative activist, former legislator, and convicted felon in the U.S. state of Colorado, most widely known for being the author of Colorado's Taxpayer Bill of Rights (TABOR). A strict advocate for limited government, Bruce wrote and promoted TABOR.
Advocates like Bruce see the experience of Colorado as an example of the positive effects of tax decreases. They cite the fact that Colorado's rate of economic growth in the dozen or so years after this system was implemented was well in excess of that of the U.S. as a whole. They also say that deciding tax increases in referendums is more democratic, as legislators may be beholden to lobby groups, special interests, and lobbyists.
One prominent advocacy group in favor of TABOR is Americans for Prosperity. Many of their 20 state chapters are currently working on plans to implement TABOR in their respective states. In Florida, AFP lobbied the Taxation and Budget Reform Committee to place a TABOR on the November 2008 ballot. And in Texas, AFP spearheaded the Taxpayer Protection Act concept of giving taxpayers greater control over how much government taxpayers want and are willing to pay for. It was also on the 2008 Republican Primary Ballot as a nonbinding initiative.
Many advocates of a more libertarian view, such as Americans for Limited Government, say that reduced taxation is a noble goal for its own sake, leading to increases in financial freedom and economic prosperity. Others note that Colorado has continued growth as well as larger tax revenues concurrent with the TABOR act.
The TABOR Foundation has partnered with Mountain States Legal Foundation to sue to enforce TABOR in Colorado, challenging that vehicle registration fees and other fees enacted without a vote of the people are actually taxes. [8] [9] MSLF has also sued on behalf of the Colorado Union of Taxpayers Foundation's members, challenging the City of Aspen's grocery bag tax. [10]
Opponents argue that the lack of tax revenue has hurt Colorado in many ways. For instance, Colorado ranks 48th in the nation for higher education funding (per personal income level), which is the lowest in 40 years, representing a drop from 34th in 1992. [11]
Opponents also argue that Colorado's economic growth has largely been despite – not because of – this system, and is a result of changing societal desires for open spaces, outdoor sports opportunities, and other "quality of life" issues that are now imperiled by Colorado's inability to provide expanding governmental services. They point out that almost 90% of state tax revenues are now already earmarked for various purposes, handicapping the state legislature and giving it very little flexibility.
They also add that the process has not been as "democratic" as its advocates purport, citing the off-year voting and complex wording that may skew results. Some opponents claim that complicated tax decisions are best decided by deliberation based on well-informed argument and informed consent, such as presumably occurs in legislatures, rather than the simplistic and emotionally charged appeals that tend to dominate referendums.
Many others argue against [12] the "Population Plus Inflation" formula, because
Over the years, TABOR opponents have tried to challenge it in various ways. A federal lawsuit was filed in May 2011, which dragged through the courts for years. In May 2017, the U.S. District Court ruled the plaintiffs didn't have standing to sue, [13] but in July 2019, the United States Court of Appeals for the Tenth Circuit reversed that decision, allowing the lawsuit to proceed. [14] In early 2015, former Governor Roy Romer, offering then-Governor John Hickenlooper advice for his new term, said he should lead the charge to repeal TABOR. [15] Gov. Hickenlooper smiled and applauded but did not respond at the event; however, a few weeks later, he said such a move would be doomed. [16] The Denver Post editorial board, which opposed TABOR in 1992, ran an editorial in February 2017 titled "Make Colorado greater: Fix TABOR", in which they offered three reasons why an outright repeal wasn't realistic, but suggested three possible workarounds. [17]
Reforms similar to Colorado's have been put forward in several states. In 2006, two Libertarian groups financially backed by New York real estate developer Howie Rich campaigned for laws similar to TABOR in eight states. [18] [19] [20]
Measures similar to the "Taxpayer Bill of Rights" are more likely to be adopted on the county and municipal level than on a statewide basis beyond Colorado; one municipality adopting the plan in recent years has been Spring Hill, Tennessee. After the November 2005 setback for proponents in Colorado, advocates in many regions are now downplaying the name "Taxpayer Bill of Rights" in favor of other terms such as "Spending Limitation Movement". Organizations dedicated to shrinking government are pushing for the adoption of TABORs in other states. Currently, Colorado is the only state with TABOR. In 2005, TABOR proposals were introduced in about half of the states. [21] A TABOR referendum on the ballot in Maine as an initiative effort led by Mary Adams was defeated in November 2006. Similar referendums were also defeated in Nebraska and Oregon that year. Similar initiatives in Maine and Washington were defeated in 2009. [22]
In North Carolina, some Republicans want a constitutional amendment to limit growth in spending to population growth and the rate of inflation. [23]
The concept is connected to several laws that have been passed. Examples include the Omnibus Taxpayer Bill of Rights (Subtitle J of the Technical and Miscellaneous Revenue Act of 1988), the Taxpayer Bill of Rights 2 passed in 1996, and the Taxpayer Bill of Rights III passed in 1998.
Nationally, Members of Congress have made attempts to give taxpayers more rights in terms of tax debts and interactions with the IRS. Congressman Pete Roskam (R-IL) introduced a bill in the House of Representatives called the Taxpayer Bill of Rights (H.R. 1058). [24] 11 Republicans cosponsored the bill. [25] The bill would require that the IRS provide people with quality service; people would only have to pay the correct amount of their taxes owed; the IRS would be required to implement better customer service; and people would have a "voice" in the process when challenging an IRS ruling. [24]
The IRS has offered its own version of a taxpayer bill of rights since the year 2014. [26] Describing the rights, the IRS has written, "Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. Explore your rights and our obligations to protect them." The rights are available to the public online in a document called Publication 1: Your Rights as a Taxpayer. [27] To help people understand their rights when dealing with the IRS, the IRS has an independent agency within the IRS called the Taxpayer Advocate Service. [28]
The Taxpayers' Bill of Rights Act (20 ILCS 2520), [29] is a provision of Illinois state law. [30] It is broken up into seven sections throughout the act. Section 1 is stating the name of the act. Section 2 is Legislative Declaration and states "The General Assembly further finds that the Illinois tax system is based largely on self-assessment." Section 2 also states "The General Assembly finds and declares that taxes are the most sensitive point of contact between citizens and their government." Section 4 explains "the Department of Revenue shall have the following powers and duties to protect the rights of taxpayers," and list 10 different responsibilities the government has. Section 5 is the taxpayer's suits. It says "Taxpayers have the right to sue the Department of Revenue if such Department intentionally or recklessly disregards tax laws or regulations in collecting taxes" Section 6 is the review of liens, and section 7 is dedicated to the cost.
Americans for Tax Reform (ATR) is a politically conservative U.S. advocacy group whose stated goal is "a system in which taxes are simpler, flatter, more visible, and lower than they are today." According to ATR, "The government's power to control one's life derives from its power to tax. We believe that power should be minimized." The organization is known for its "Taxpayer Protection Pledge", which asks candidates for federal and state office to commit themselves in writing to oppose all tax increases. The founder and president of ATR is Grover Norquist, a conservative tax activist.
Proposition 13 is an amendment of the Constitution of California enacted during 1978, by means of the initiative process, to cap property taxes and limit property reassessments to when the property changes ownership, and to require a 2/3 majority for tax increases in the state legislature. The initiative was approved by California voters in a primary election on June 6, 1978, by a nearly two to one margin. It was upheld by the Supreme Court in 1992 in Nordlinger v. Hahn, 505 U.S. 1 (1992). Proposition 13 is embodied in Article XIII A of the Constitution of the State of California.
William Forrester Owens is an American former politician who served as the 40th Governor of Colorado, from 1999 to 2007. A member of the Republican Party, he was re-elected in 2002, amassing 62.6% of the vote, the largest Republican share of the vote in state history. As of 2024, he is the last Republican to serve as Governor of Colorado.
The Oregon tax revolt is a political movement in Oregon which advocates for lower taxes. This movement is part of a larger anti-tax movement in the western United States which began with the enactment of Proposition 13 in California. The tax revolt, carried out in large part by a series of citizens' initiatives and referendums, has reshaped the debate about taxes and public services in Oregon.
The National Taxpayers Union (NTU) is a fiscally conservative taxpayer advocacy organization and taxpayers union in the United States, founded in 1977 by James Dale Davidson. NTU says that it is the oldest taxpayer advocacy organization in the nation. It is closely affiliated with a non-profit foundation, the National Taxpayers Union Foundation (NTUF). The organization has ranked politicians on their perceived fiscal responsibility, in the eyes of the National Taxpayers Union.
Proposition 2½ is a Massachusetts statute that limits property tax assessments and, secondarily, automobile excise tax levies by Massachusetts municipalities. The name of the initiative refers to the 2.5% ceiling on total property taxes annually as well as the 2.5% limit on property tax increases. It was passed by ballot measure, specifically called an initiative petition within Massachusetts state law for any form of referendum voting, in 1980 and went into effect in 1982. The effort to enact the proposition was led by the anti-tax group Citizens for Limited Taxation. It is similar to other "tax revolt" measures passed around the same time in other parts of the United States. This particular proposition followed the movements of states such as California.
In 2021, the economy of the State of Colorado was 16th largest in the United States with a gross state product of $421 billion. Colorado's per capita personal income in 2019 was $61,157, putting Colorado 12th in the nation.
The Internal Revenue Service Restructuring and Reform Act of 1998, also known as Taxpayer Bill of Rights III, resulted from hearings held by the United States Congress in 1996 and 1997. The Act included numerous amendments to the Internal Revenue Code of 1986. The bill was passed in the Senate unanimously, and was seen as a major reform of the Internal Revenue Service.
The Office of the Taxpayer Advocate, also called the Taxpayer Advocate Service (TAS), is an office within the Internal Revenue Service (IRS) of the U.S. Department of the Treasury, reporting directly to the Commissioner of Internal Revenue. The office is under the supervision and direction of the National Taxpayer Advocate, who is appointed by the Secretary of Treasury.
Oregon ballot measure 48 was one of two unsuccessful ballot measures sponsored by the Taxpayers Association of Oregon (TAO) on the November 7, 2006 general election ballot. Measure 48 was an initiated constitutional amendment ballot measure. Oregon statute currently limits state appropriations to 8% of projected personal income in Oregon. If Governor declares emergency, legislature may exceed current statutory appropriations limit by 60% vote of each house. This measure would have added a constitutional provision limiting any increase in state spending from one biennium to next biennium to the percentage increase in state population, plus inflation, over previous two years. Certain exceptions to limit, including spending of: federal, donated funds; proceeds from selling certain bonds, real property; money to fund emergency funds; money to fund tax, "kicker," other refunds were included in the provisions of the measure. It also would have provided that spending limit may be exceeded by amount approved by two-thirds of each house of legislature and approved by majority of voters voting in general election.
The Constitution of the State of Colorado is the foundation of the laws and government of the U.S. state of Colorado. The Colorado State Constitution was drafted on March 14, 1876; approved by Colorado voters on July 1, 1876; and took effect upon the statehood of Colorado on August 1, 1876. As of 2020, the constitution has been amended at least 166 times. The Constitution of Colorado derives its authority from the sovereignty of the people. As such, the people of Colorado reserved specific powers in governing Colorado directly; in addition to providing for voting for Governor, state legislators, and judges, the people of Colorado have reserved initiative of laws and referendum of laws enacted by the legislature to themselves, provided for recall of office holders, and limit tax increases beyond set amounts without explicit voter approval, and must explicitly approve any change to the constitution, often with a 55% majority. The Colorado state constitution is one of the longest in the United States.
Douglas Edward Bruce is an American conservative activist, attorney, convicted felon, and former legislator who served as a member of the Colorado House of Representatives from 2008 to 2009.
Under United States tax law, certain performing artists are eligible to deduct the expenses incurred in the course of their employment as performing artists. The deduction itself is provided by IRC § 62(a)(2)(B), while qualifications of a Qualified Performing Artist ("QPA") are provided by IRC § 62(b).
A tax-free savings account is an account available in Canada that provides tax benefits for saving. Investment income, including capital gains and dividends, earned in a TFSA is not taxed in most cases, even when withdrawn. Contributions to a TFSA are not deductible for income tax purposes, unlike contributions to a registered retirement savings plan (RRSP).
The politics of Colorado, United States, are that of a blue state. Once considered a swing state that used to be Republican-leaning, Colorado has been trending Democratic since the early part of the 21st century due to the organization of the state Democratic Party, changing demographics, and a rising number of the large unaffiliated bloc of voters leaning Democratic. The growing shift of the state's Republican Party towards social and religious conservatism along with shifting further to the right has also been cited as reasons for the changing voting patterns of Colorado.
Initiative 126 or the Savings Account for Education Initiative appeared on the ballot as Amendment 59. The measure would have created a savings account in the state education fund funded by 10 percent of the monies deposited into the fund, including revenue that would otherwise be rebated under the Taxpayer Bill of Rights rules.
The Independence Institute (II) is a libertarian think tank based in Denver, Colorado. The group's stated mission "is to empower individuals and to educate citizens, legislators and opinion makers about public policies that enhance personal and economic freedom."
The alternative minimum tax (AMT) is a tax imposed by the United States federal government in addition to the regular income tax for certain individuals, estates, and trusts. As of tax year 2018, the AMT raises about $5.2 billion, or 0.4% of all federal income tax revenue, affecting 0.1% of taxpayers, mostly in the upper income ranges.
The premium tax credit (PTC) is a mechanism established by the Affordable Care Act (ACA) through which the United States federal government partially subsidizes the cost of private health insurance for certain lower- and middle-income individuals and families. The PTC is a refundable tax credit, and may be applied directly to the cost of insurance premiums.
The state and local tax deduction is a United States federal itemized deduction that allows taxpayers to deduct certain taxes paid to state and local governments from their adjusted gross income.