A Billion Reasons Colorado Taxpayers Don't Trust State Government

Lawmakers naturally chafe at any restriction on their power to tax and spend, but Colorado's Democrat governing monopoly has done more in just three years to carve gaping loopholes in the Taxpayers Bill of Rights (TABOR) than did two previous governors and hundreds of legislators from both parties before them.

Gov. Bill Ritter and the Democrat-controlled legislature have increased property taxes by more than $234 million a year, raised vehicle licensing "fees" by $250 million a year, instituted new hospital patient "fees" that will cost $600 million a year, and imposed some $180 million in new sales and use taxes.

All told, Ritter and the legislature have managed to increase the cost of taxes and fees by more than $1.1 billion a year and, incredibly, not once triggered Colorado's constitutional requirement that taxes can be raised only by a vote of the people.

Taxpayer protections — even when written into the state constitution — are targets for continual political and legal assault by forces in and near government.  TABOR enjoyed grudging deference for some 14 years after it passed in 1992.  Lawmakers occasionally asked voters to make exceptions to TABOR's limits but largely adhered to its spending caps and its requirement that neither those limits nor any "tax policy change directly causing a net revenue gain" may be enacted without a public vote.

The 2006 election changed that by empowering, for the first time since TABOR was added to the state constitution, a Democrat monopoly at the State Capitol.  Unlike their predecessors who respected the will of the voters, even when it was inconvenient, these lawmakers were openly hostile to TABOR's objective of restraining government growth.

In 2007, Democrats changed the school finance act to allow local school districts to collect more property tax revenues and reduce the state's share of K-12 education funding.  Previously, even many Democrats acknowledged that such a change must be presented to the voters.

This time, however, Democrats commandeered the political will to pass such a law and constructed a legal argument which, although rejected by a lower court, ultimately prevailed in the Colorado Supreme Court.  As a result, Coloradans will pay an extra $234 million this year in property taxes — and nearly $3.8 billion extra over 10 years.

Thus emboldened, the 2009 legislature smashed another of TABOR's prohibitions by eliminating the general fund spending limit without a public vote. Although Colorado Revised Statutes specifically referred to this provision as a "limitation" on the general fund, Democrats and their attorneys argued that it was instead an "allocation strategy" and, therefore, not subject to TABOR's prohibition against weakening existing spending limits.

In its ruling on the 2007 property tax increase, the supreme court also went out of its way to tip off lawmakers that they could also raise other taxes so long as they didn't raise revenue above the TABOR spending limit.

An even greater subterfuge, however, is the onslaught of taxes masquerading as fees.  Generally, taxes — which are subject to TABOR and therefore subject to voter approval — are collected broadly and can be spent for any purpose.  Fees, however, have long been understood to cover the cost of a regulatory function or of administration (e.g., licensing or registration) upon which the fee is assessed.

Democrats make no pretense that the largest of their fee increases merely cover administrative expenses.  Ritter, in particular, has adopted a much more liberal definition of "fees," suggesting the primary criterion necessary for a tax to be labeled a fee is a "direct relationship" between the payer of the fee and a government activity funded by the fee.

Under this loose construction, however, it seems obvious that a new "fee" on gasoline can be imposed just as easily and without a public vote so long as fee revenues are dedicated exclusively to highway construction or repair.

The most egregious fee increase — a $600 million tax on hospital services — was dubbed, ironically, the Health Care Affordability Act.  This fee will be assessed on "outpatient and inpatient services" and ultimately paid by patients or their insurers, even though those patients receive no direct benefit in return.

Together these two fees when fully implemented are projected to raise a combined $850 million a year.  All other previously-existing state fees were projected to generate about $1.6 billion in 2009-10, illustrating how this new, expansive definition of "fee" threatens to become the exception that swallows the rule.  With fees of this magnitude, voters may never be asked to approve another genuine tax.

Not surprisingly, Gallup now reports that voter confidence in state government has fallen to its lowest level ever, and various tax cut measures appear headed for the ballot in November.  Although Democrats expected to build a legacy of expanding social welfare entitlements and increasing funding for K-12 and higher education, instead they may have ignited a taxpayer revolt.

Mark Hillman (www.MarkHillman.com) served as senate majority leader and state treasurer.