In case you haven’t heard already, Colorado has been making a killing off of legal marijuana. The substance — which we’ve come to know by many names like reefer, pot, bud, herb, and gonja just to name a few — has brought in millions for the Rocky Mountain state. Colorado’s marijuana tax revenue data was just released for the month of September.
Looking at this tax data, it appears as though the trend-setting state didn’t sell as much retail marijuana as it did during the month prior. But, in spite of the sales slowdown, the state is still earning enough cash from marijuana to have its citizens profit. Under the Taxpayer Bill of Rights (TABOR), Colorado citizens may even receive a ‘refund’ because marijuana revenues were higher than anticipated.
September’s taxes and revenue
During September, Colorado brought in $2.94 million from sales taxes on recreational marijuana alone. Considering a 10% tax rate, this means sales during the month of September were just under $30 million, which is a cool $3 million less than during the month of August when the state brought in $3.31 million in recreational marijuana sales tax revenue.
On top of this cash, Colorado is still earning huge tax dollars from medical marijuana sales taxes (at 2.9%) which have brought the state over $900,000 during the month of September alone. It also earns money from the additional 2.9% tax it imposes on retail pot, and the 15% excise tax that’s imposed on suppliers, manufacturers, etc.
What is TABOR and is it unique to Colorado?
The TABOR is designed to be a kind of like a system of checks and balances. In Colorado, the TABOR limits the amount of revenue growth to the sum of the state’s population growth plus any increase in the rate of inflation. This means that if the population were to grow by 2% and inflation were to grow by 2%, available state revenue can increase by no more than 4%, unless voters approve an increase.
According to the Colorado Department of Revenue, “Under TABOR, state and local governments cannot raise tax rates without voter approval and cannot spend revenues collected under existing tax rates if revenues grow faster than the rate of inflation and population growth, without voter approval.”
Other states have brought similar TABOR legislation to the table in the past, but Colorado is the only state that actually has such a policy in action.
Colorado Residents Looking at Pot Tax Rebate
Last Monday, Colorado Gov. John Hickenlooper unveiled the state’s $26.8 billion proposed budget for next fiscal year. The budget includes $167.2 million in tax rebates for Colorado taxpayers, including $30.5 million in rebates due to total state revenue that was higher than predicted. Under the Colorado Taxpayer’s Bill of Rights (TABOR) the state must either refund the excess amount above the estimate,or add a measure to a future ballot asking the voters to let the state keep and spend the surplus.
The rebates are mandated by TABOR, because the revenue from marijuana sales is different than projections included in the election book for the 2013 Proposition AA. Under TABOR, since the estimate was off, the state has to either refund the excess cash or go to voters to ask if the state can keep it.
The budget proposal was announced one day before the Nov. 4 election that gave Hickenlooper another term. The spending plan includes a 7 percent increase from the current year’s budget, representing $1.7 billion in new spending of state and federal money. $908 million in state spending includes $107 million in additional funds for higher education, $103 million for road projects and a 2 percent pay hike for many state employees.
Colorado’s economy is improving, but much of the new money is due to tax collections exceeding the state’s revenue cap, triggering rebates under TABOR for the first time in 15 years. The provision requires refunds if the revenue is greater than the rate of population growth and inflation. Unless, that is, the voters decide to return the money.
Hickenlooper’s budget directs $167.2 million of the TABOR rebate for fiscal year 2015-16 toward a tax credit for low income workers, along with sales tax refunds. He did not address exactly how to rebate the $30.5 million portion for recreational pot taxes, that decision being left to state lawmakers.
The rebate issue became a campaign issue last month when the governor was noncommittal on whether he would endorse a tax rebate, or if he would ask voters for permission to spend it. At a gubernatorial debate Oct. 24 he did commit to a rebate.
Vice Chairman of the Joint Budget Committee Sen. Pat Steadman said the overage is not happening because the taxes are exceeding the estimates, but rather because the economy is growing. Hickenlooper stated that “Colorado’s economic activity continues to outperform the national expansion,” and said looking ahead, the most likely scenario is for that momentum to continue.
Lawmakers have the option to lower excise and sales tax rates on recreational pot to bring the revenue in line with projections, but that would most likely impact $40 in annual excise tax revenue that has been allocated to school construction. Rep. Cheri Gerou, a member of the Joint Budget Committee, said lowering the sales tax rate would mean the state could not take care of K-12 education under BEST, the Building Excellent Schools Today program.
So much of the marijuana revenue is allocated for school construction and reimbursing counties for regulation expenses that it is possible that the cannabis refund would have to come out of the state’s general fund. It is uncertain how the pot tax rebate will be handled, whether it will go to all Colorado taxpayers or only to those who bought recreational marijuana. Gerou said that despite the higher-than-projected revenue, legalized recreational marijuana could actually cost the state money in this first year.
By Beth A. Balen
Read more at http://guardianlv.com/2014/11/colorado-residents-looking-at-pot-tax-rebate/#fgIF8cuuEo3AYXHk.99
Hickenlooper’s budget plan endorses tax rebates, new state spending
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http://www.denverpost.com/news/ci_26856988/hickenloopers-budget-plan-endorses-tax-rebates-new-state
Colorado Goes to the Supreme Court to Defend TABOR
Three years ago, a group of primarily government plaintiffs sued in federal district court to void Colorado’s Taxpayers Bill of Rights (TABOR). TABOR allows the people, not just the legislature, to vote on most tax increases, most debt increases, and some spending hikes.
http://blog.tenthamendmentcenter.com/2014/10/colorado-goes-to-the-supreme-court-to-defend-tabor/
Sen. Mark Udall says TABOR should be left alone
By Lynn Bartels
Udall made his position known Tuesday night in The Denver Post Senate debate where he and Republican Congressman Cory Gardner squared off.
One of the yes/no questions the pair was asked was about the 1992 voter-approved ballot measure that controls taxation and spending in Colorado. Should it be changed or altered?
Gardner said “no,” a stance adopted by many conservative Republicans over the years. Udall also said “no.”
“You’re kidding,” said former lawmaker Norma Anderson, a Lakewood Republican who is part of a bipartisan group of current and former state legislators and local officials challenging the constitutionality of TABOR in federal court.
“I’ll be damned.”
The suit alleges that TABOR, which prohibits the legislature from raising taxes without a vote of the people, limits the General Assembly’s power in violation of the U.S. Constitution guarantee that states have a “republican” government, in which the authority to govern is given to elected officials. The plaintiffs argue in court filings that TABOR has caused “a slow, inexorable slide into fiscal dysfunction” in Colorado.
Gardner called out Udall on his TABOR answer.
“I find it curious that Sen. Udall supports TABOR when he actually has supported tax increase after tax increase at the state level,” he said, during the debate.
CO Revenue Forecast Shows Continued Growth
The latest revenue forecast shows continued growth with the state’s General Fund revenue expected to grow 7.4 percent in FY 2014-15 and 6.4 percent in FY 2015-16.
Projections show an increase of $80.9 million in FY 2014-15, or 0.8 percent higher than compared to the June 2014 forecast. Projections for FY 2015-16 are 1.3 percent, or $131 million higher.
“Colorado’s economy continues to expand at a pace that is among the best in the nation,” the Office of State Planning and Budget reported today. “The state’s concentration of individuals and businesses focused on products that are in high demand in today’s economy continues to feed economic growth. Colorado also benefits from a high degree of business dynamism, as well as a growing culture for innovation and collaboration among individuals and firms. However, not all parts of the state are experiencing the same degree of economic strength.”
Income taxes from wage withholdings and sales tax collections continue to grow at a solid pace due to Colorado’s economic expansion.
The state’s General Fund reserve now is projected to be $232.6 million above its required amount for FY 2014-15.
The state is projected to end FY 2013-14 with $235.8 million above its required amount based on preliminary information from the State Controller. All but $25 million of this money, which remains in the General Fund, is allocated to various cash funds, including $135.3 million to the Capital Construction Fund. Several higher education capital construction projects will proceed as a result.
TABOR revenue is forecast to be $48 million, or just 0.4 percent, below the Referendum C cap in the current fiscal year, which is within the normal range of possible forecast adjustments. TABOR revenue is forecast to exceed the cap by $133.1 million in FY 2015-16 and $239.4 million in FY 2016-17, meaning that a refund to taxpayers is required under this forecast, unless voters allow the State to retain the revenue.
Though a TABOR refund is projected, the money forecast to be available in the FY 2015-16 General Fund would allow for a 10.5 percent increase in appropriations. Meanwhile, under current law, as a result of the TABOR refunds in FY 2015-16 and FY 2016-17, SB 09-228 transfers will be reduced by half.
Under this forecast, in FY 2015-16, revenue above the Referendum C cap would be refunded through the State Earned Income Tax Credit to qualified taxpayers and the sales tax refund to all taxpayers. In FY 2016-17, revenue above the Referendum C cap would be refunded through a temporary income tax rate reduction and the sales tax refund.
Many indicators point to a continued economic expansion. A special set of unique circumstances, however, could result in an economic slowdown. One risk is less accommodative monetary policy. Also, current weaker global economic conditions, as well as continued geopolitical tensions, are concerns. Unexpected events surrounding these issues could have negative implications for the economy and result in revenue collections that are substantially different from this forecast. It is also important to note that even relatively small changes in the projected growth rate of revenue can materially impact the budget outlook.
http://theprowersjournal.com/2014/09/co-revenue-forecast-shows-continued-growth/
School Finance Legislation and Consequences, with TABOR
TABOR-required refunds would be $125M in ’16-17 and $392M in ’17-18, Colorado legislative economists project. Need for refunds would require legislature to set aside $$ in prior years, likely affecting such things as cuts in K12…
http://www.coloradofiscal.org/info-graphic-a-history-of-school-finance-in-colorado/
Penn’s take on Kerr order denying rehearing en banc
TABOR Directors and friends,
We will not see a review by (appeal to) the entire US 10th Circuit Court of Appeals (en banc) in the federal case to overturn the Taxpayer’s Bill of Rights.
The next logical step is for the Defendant to ask the US Supreme Court to hear an appeal that the case should not proceed to the trial phase because the substance of the case does not fall within the judicial branch to decide. The Solicitor General’s office this morning confirmed in a telephone call with me that such a filing is contemplated.
Luke Wake and his team at NFIB are ready to help out once again. See his message below.
The dissents from the 10th Circuit Court are telling and a very important development in proceeding to the next step. They follow the very brief ruling in the attachment.
Our TABOR Foundation is committed to seeing this through as far as we need to, and Board approval is already in place. I’ll keep you informed as I learn more.
Penn Pfiffner
I’ve been in communication with each of you about the Kerr v. Hickenlooper case, wherein a handful of ideologically motivated litigants are challenging the constitutionality of the Colorado Taxpayer Bill of Rights (TABOR). TABOR was an initiative approved by Colorado voters in the early 1990s, which gives the citizens a right to vote on new taxes. NFIB was very supportive of the reform then and the NFIB Legal Center is now leading its defense (along with TABOR Foundation).
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> As you recall, I previously explained that the Tenth Circuit federal court of appeal recently decided to allow a “Guarantee Clause” challenge to proceed against TABOR. And I’ve said before, this would open Pandora’s box for challenges to any constitutional amendment restraining the legislature’s tax and spend powers, or potentially any amendment limiting the state’s police powers. We were hopeful that the Tenth Circuit would review the decision because it is binding on all Tenth Circuit states, and because it provides persuasive authority that could be invoked by litigants challenging taxpayer protections in other states as well. Unfortunately the Tenth Circuit denied Governor Hickenlooper’s petition for en banc review; however, there were three very strong dissenting opinions (see attached). These dissents largely echoed the concerns we raised in our original amicus brief.
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> Given the force of these three dissents, I should think the State is in as good a position as possible in pursuing a petition for certiorari in the U.S. Supreme Court. When considering whether to take a case the Supreme Court asks two questions: (1) Does this decision create a conflict between federal circuits, or does it expressly conflict with a previous Supreme Court decision? (2) Does the case raise an issue of national concern? Both can be answered in the affirmative.
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> Early in the 20th Century, the Supreme Court decided that a Guarantee Clause challenge to Oregon’s initiative process was precluded by the political questions doctrine. The Court has since repeatedly affirmed that Guarantee Clause cases are non-justiciable. In a 1992 opinion Justice Ginsberg held out the possibility that there may be some conceivable Guarantee Clause case that might be justiciable [we don’t necessarily disagree that there might be some case in the future], but no Court of Appeal has found one to date–except the Tenth Circuit in this case.
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> The Tenth Circuit held that a Guarantee Clause challenge should be allowed to move forward despite the fact that the judges were not presently aware of any standard or principled rule for how the case might possibly be decided. This is highly problematic because it encourages litigation without principled rules. And the case certainly raises an issue of national concern because–as discussed above–it invites challenges to potentially any state constitutional amendment, especially voter initiatives–and most especially taxpayer protections.
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> We are now planning to file an amicus brief encouraging the Supreme Court to take the case. Each of you has indicated that your organization has tentatively agreed to join with us in this filing. Please let me know if you have any questions. My understanding is that the State will be filing its petition for certiorari sooner than later. So we may be filing as early as September. I will keep you all in the loop.
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> Very best,
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> -Luke
Kerr Order denying Petition En Banc
Colorado AG loses another round from Court of Appeals on TABOR lawsuit
By Lynn Bartels
Attorney General John Suthers has lost his request to have the entire 10th U.S. Circuit Court of Appeals rehear a decision by a court panel that ruled Coloradans have a right to challenge the constitutionality of the Colorado Taxpayer’s Bill of Rights.
The 6-4 decision by the court marks another milestone in a legal fight over how Colorado conducts its most important functions. One of the court’s 11 judges recused himself.
Colorado voters in 1992 passed the TABOR amendment, which in part limits state spending and bars lawmakers from raising taxes without a vote of the people.
A lawsuit filed against Gov. John Hickenlooper in 2011 argues that by taking away lawmakers’ ability to tax, TABOR violates the U.S. Constitution’s guarantee that every state have a republican form of government.
Suthers questioned whether the plaintiffs had the right to sue, but was rebuffed by a U.S. District Court judge. A panel of Court of Appeals judges in March concurred with the lower court.
In its 49-page decision, the 10th U.S. Circuit panel in March noted the Supreme Court has held that members of a state legislature may have standing to sue in order to vindicate the “plain, direct and adequate interest in maintaining the effectiveness of their votes.”
It did not rule on the merits of the case.
Suthers then asked for the entire court to decide whether plaintiffs had standing and other issues.
The latest decision paves the way for a trial in U.S. District Court unless the attorney general successfully seeks review by the U.S. Supreme Court.
“We are of course gratified with this decision supporting the plaintiffs’ position that the case should be heard on its merits, and we look forward to that hearing in U. S. District Court,” one of the plaintiffs’ attorneys, Mike Feeley said, in a statement.
“Now, with the procedural objections resolved and three rulings all in the plaintiffs’ favor — one in U. S. District Court in 2012 and two this year by the 10th Circuit — we hope the case can proceed without delay and without an expensive additional appeal to the Supreme Court.”
David Blake, deputy attorney general for legal policy said, “We will be discussing the case with our client but we expect to seek Supreme Court review.”
The plaintiffs, who include some current state lawmakers such as Sen. Andy Kerr, D-Lakewood, and House Majority Leader Dickey Lee Hullinghorst, D-Boulder, claims that TABOR deprives them of their ability to perform the “legislative core functions of taxation and appropriation.” Moreover, the plaintiffs say explicitly that TABOR prevents them from doing their jobs.
Lynn Bartels: 303-954-5327, lbartels@denverpost.com or twitter.com/lynn_bartels
http://www.denverpost.com/news/ci_26196416/colorado-ag-loses-another-round-from-court-appeals