TABOR is a friend to Colorado seniorsTABOR and taxes have a big impact on seniors in Colorado. TABOR is one of the best friends to seniors in Colorado because it limits the growth of government spending (unless approved by Colorado voters) which, in turn, reduces the need for more taxation. In addition, there are other laws that benefit Colorado taxpayers 55 and older who get a $20,000 retirement income exclusion from state taxes, and the exclusion reaches $24,000 when they reach 65. Seniors may qualify for this exemption of up to 50% of the first $200,000 of property value if they’ve lived in the same house for 10 years. In the November 2000 election, Colorado voters passed a Property Tax Exemption for seniors, known as Referendum A. It is called the Homestead Exemption Act.
Conversely, a big downside for retirees is that Colorado’s sales taxes (which have a local component) are on the high side and can exceed 11% in some parts of the state. Seniors need to be vigilant about local sales tax increase proposals and local property tax increase proposals that are relentless in requesting more money. Local governments and special districts frequently attempt to elude TABOR restrictions by de-Brucing. As a result, local government tax growth often exceeds the state tax growth rate. Colorado taxpayers have rejected over 20 statewide tax increases since the TABOR amendment to the Colorado Constitution was approved by the voters in 1992. Seniors should oppose de-Brucing efforts at the local level to preserve the TABOR provisions.
Excepting the plains, the only thing that is flat in Colorado is the income tax rate. Colorado became a flat tax state in 1987 and has a flat income tax rate of 4.55% (the approval of Proposition 116, which appeared on the November 2020 ballot, reduced the rate from 4.63% to 4.55%). TABOR limits how much its revenue can grow from year-to-year by lowering the tax rate if revenue growth is too high. For example, in 2019, this resulted in a rate reduction to 4.5%. Colorado is only one of nine states in the US with a flat income tax. The others are Illinois, Indiana, Kentucky, Massachusetts, Michigan, North Carolina, Pennsylvania, and Utah. Only Indiana, Michigan, and Pennsylvania have a lower flat tax than Colorado. However, none of these states have a taxpayer’s bill of rights (TABOR) like Colorado does.
Denver and a few other cities in Colorado also impose a monthly payroll tax.
As tax season is upon us, there are several considerations worth examining about how Colorado is doing. Colorado, like most states, faces fiscal challenges arising from COVID and the lockdowns. Colorado has one of the most expensive states for real estate and the recent Gallagher vote could result in higher residential property tax burdens for Coloradans in the years to come. The Colorado state pension system (PERA) has one of the worst funding ratios in the nation, suggesting PERA funding shortfalls will present problems for Colorado taxpayers and PERA beneficiaries in the years to come. Further, a low funding ratio could result in credit rating downgrades leading to higher borrowing costs for the state. Colorado has about 25% of the population on Medicaid. This could present significant challenges for the Colorado taxpayers in years to come. There will be calls for more taxes and fees to meet the desires of the Colorado legislature.
AFP Colorado@AFPColorado