Colorado taxpayers will be sent even larger refund checks next year than expected after state tax revenues finished the fiscal year much higher than budget analysts for the Legislature and in the governor’s office predicted.
The state may now have to refund nearly $1 billion more than originally expected, nonpartisan Legislative Council Staff and the governor’s Office of State Planning and Budgeting told state lawmakers this week, increasing refund checks by hundreds of dollars per person.
Exactly how large those Taxpayer’s Bill of Rights refund checks will be remains in flux, in part because the number will be determined by whether voters pass Proposition HH in November, a 10-year property tax relief plan from Democrats in the General Assembly and Gov. Jared Polis.
The Legislature passed a bill in the final three days of its 2023 lawmaking term, which ended May 8, that would make the refund check amounts the same for everyone if voters pass Proposition HH. They were originally expected to be about $650 for single filers and roughly $1,300 for joint filers, but could now be roughly $850 for single filers and $1,700 for joint filers.
(Last year, Colorado taxpayers received TABOR refund checks of $750 or $1,500 to account for surplus collected in the 2021-22 fiscal year, which ended June 30, 2022.)
If Proposition HH fails, the refund checks would be tied to income levels. Under the default refund system – called the six-tier sales tax refund mechanism – people who make more money get bigger refund checks based on which of six income tiers they fall into.
People in the lowest tier, who make up to $50,000 a year, were expected to receive refund checks of $454 for single filers or $908 for joint filers. For those in the highest tier, who make $279,001 or more, the checks were expected to be $1,434 for single filers and $2,688 for joint filers.
The improved economic outlook would mean larger refunds for people in every tier, though people in the top tier would benefit most.
People in the lowest tier would now receive refund checks of $587 for single filers or $1,174 for joint filers. For those in the highest tier, the checks would now be $1,854 for single filers and $3,708 for joint filers.
The refund amounts are determined by how much money the state government collects above the TABOR cap on government growth and spending. The cap is calculated by annual growth in population and inflation.
Colorado taxpayers will get their refund checks next year after they file their taxes.
Nonpartisan Legislative Council Staff now expects the TABOR cap to be exceeded in the current 2022-23 fiscal year, which ends June 30, by $3.31 billion – an increase of roughly $600 million over what they projected in March.
The governor’s Office of State Planning and Budgeting now expects the TABOR cap to be exceeded in the current fiscal year by $3.527 billion – an increase of about $870 million over what they projected in March.
Greg Sobetski, the chief economist for Legislative Council Staff, called the increases a “significant upward revision.”
Both LCS and OSPB said better-than-expected corporate income tax revenue was a large driver of the improvements.
The updates were presented Tuesday to the Legislature’s Joint Budget Committee, which received its quarterly economic and tax revenue forecasts from LCS and OSPB. While the end of the fiscal year is fast approaching, it will be months before the state knows exactly how much money it collected over the TABOR cap.
Legislative Council Staff and the governor’s Office of State Planning and Budgeting forecasts state government to collect tax revenue in excess of the TABOR cap through at least the 2024-25 fiscal year, which ends June 30, 2025.
Emily Dohrman, an economist with Legislative Council Staff, said the risk of recession has also decreased.
“The economy is still showing positive growth, but slower growth than what we saw through most of 2022,” she told the JBC. “Our forecast is anticipating that growth will continue to slow through the end of 2023 but then return to a more moderate pace of growth in 2024 and 2025.”
She said there’s still a risk of an economic downturn, but that risk is lower than it was in March.
Polis touted the forecasts presented to the JBC on Tuesday. He said Colorado’s economy remains strong and that it’s evidence the state “continues to be the best place to live, work and do business.”
The next quarterly tax revenue and economic forecasts will be presented to the JBC in September. The panel in November will begin drafting the state’s 2024-25 fiscal year budget, which takes effect on July 1, 2024.
The full Legislature will vote on the spending plan after it reconvenes in January.