Over Thirty Years after its Passage, Governments are Still Adjusting to the Effects of Colorado’s Taxpayer Bill of Rights

Less than a month into the second regular session of the 75th General Assembly, discussion of reforms to the Colorado Taxpayer Bill of Rights (“TABOR”) have already arisen.  This article provides a high-level overview of TABOR, discusses legislative responses to TABOR and its impact on Colorado’s state budget, and explores a recent Colorado Supreme Court opinion demonstrating TABOR’s impact on local government.

TABOR’s Enactment and History

TABOR is an amendment to the Colorado Constitution that was approved by voters in 1992.  While there are other components to TABOR, two key provisions restrict the amount of revenue that governments can collect and spend in any fiscal year.  First, TABOR mandates that the state or local governments (each, a “Government”) obtain voter approval before imposing a new tax or tax rate increase or creating a multiple-fiscal year debt.  What constitutes a “new tax” is not defined in the text of TABOR, but the Colorado Supreme Court has stated that the word “new” suggests the creation (i.e. applicable to a new class of goods or activity) rather than alteration of an existing tax.  As illustrated in the MetroPCS v. Lakewood case discussed below, the failure of a Government to properly distinguish between the creation of a new tax and an alteration can have drastic fiscal consequences.

Second, TABOR sets a limit on the amount of revenue a Government may retain, either to spend or to save (the “Revenue Limit”).  Revenue collected by a Government in a fiscal year in excess of its Revenue Limit must be refunded to taxpayers in the next fiscal year, unless voters approve a revenue change as an offset.  TABOR sets out a formula that is used to determine the Revenue Limit each fiscal year, which essentially adjusts the prior year’s Revenue Limit for inflation and population growth.  TABOR was modified in 2005 by the passage of Referendum C, which voters approved as a statutory change to TABOR.  Referendum C implemented a five-year “time out” period during which the state was allowed to retain and spend all revenue that was collected, and required that revenue retained during this time period be spent on specific purposes, including the funding of health care and education.  Referendum C also set a new method of calculating the Revenue Limit (beginning in 2010), using the highest total state revenues for a fiscal year during the time out period, adjusted each subsequent fiscal year for inflation and population growth.

Legislative Responses to TABOR

Since TABOR’s passage, voters in many local municipalities have voted to permit their local Governments to retain all tax revenue collected in a fiscal year, a process known as “De-Brucing” (named after former state representative Douglas Bruce who was the main proponent of TABOR).  For example, in 2012, voters in Denver approved Ballot Initiative 2A, which authorized Denver to collect, retain and spend all tax revenue derived from existing gross tax rates, to the extent such amounts were in excess of Denver’s Revenue Limit.

In 2019, the state legislature passed a bill known as Proposition CC, which was contingent on voter approval, that would have “De-Bruced” at the state level and permitted the state to retain revenue collected over the Revenue Limit to fund public schools, higher education, roads, and transit.  In 2023, the legislature voted to place Proposition HH on the ballot, which, among other things, sought to increase the Revenue Limit.  Both of these initiatives were rejected by voters.

More recently, in 2025, the house introduced House Bill 25-1023 in an attempt to challenge the constitutionality of TABOR in its entirety.  This bill, which did not pass, would have authorized the Legislature’s Committee on Legal Services to retain legal counsel and file a lawsuit on behalf of the Colorado General Assembly to determine the constitutionality of TABOR.  The argument centers on the so-called “Grantee Clause” of the United States constitution, which guarantees “a republican form of government” to every state, contending that TABOR “has removed necessary and essential powers of [Colorado’s] representative institutions and so deprived the state of a republican form of government…”  This legal question has not been determined by any state or federal court in Colorado.

While similar plans to challenge the constitutionality of TABOR have not yet been introduced in the current legislative session, some lawmakers have announced plans to do so, along with other proposed legislation to address TABOR’s impact on the state budget.

Lakewood Must Refund Over $42 Million in Taxes Collected Without Voter Approval

A recent Colorado Supreme Court case illustrates the consequences of a Government’s failure to obtain voter approval prior to imposing new taxes.  In MetroPCS v. Lakewood, the Colorado Supreme Court held that ordinances enacted by the City of Lakewood (“Lakewood”) constituted “new taxes” under TABOR.  Failure to obtain voter approval for these new taxes violated TABOR, and thus they are void and unenforceable.

In 1969, Lakewood enacted a tax against utility companies operating within Lakewood on the maintenance of “a telephone exchange and lines therewith” and on “supplying local exchange telephone services” to Lakewood residents.  In 1996, Lakewood enacted a new ordinance (the “1996 Ordinance”) that imposed a tax “on and against each person engaged in” providing “basic local telecommunications service” within Lakewood; “basic local telecommunications service” included provision of cellular or mobile radio service “to any business or entity…”  The 1996 Ordinance was amended in 2015 (the “2015 Ordinance” and, together with the 1996 Ordinance, the “Ordinances”) to impose a tax “on and against each person engaged” in providing “basic local exchange service” within Lakewood; “basic local exchange service” was defined to include “cellular, mobile radio or any wireless voice service” to “any business, person or entity…”  Neither of the Ordinances was approved by voters.

In response to a legal challenge by MetroPCS, the Colorado Supreme Court held that the Ordinances constituted new taxes, not just extensions of the 1969 tax against utility companies.  The Ordinances both expanded the class of persons subject to the tax (from utility providers only to “each person” engaged in the applicable business activities) and expanded the tax to cover the provision of all cellular services.  Because the Ordinances created new tax liabilities and types of providers and services, they constituted new taxes under TABOR.  The City is currently evaluating how to finance the refunds that must be made in light of the ruling.