DENVER - The Legislature could repeal nearly $2 billion in tax breaks without asking voters permission, a legislative lawyer said Wednesday.
Sharon Eubanks presented the Joint Budget Committee with her shocking analysis of a recent state Supreme Court decision, which she said gives legislators the power to raise taxes without a vote of the people.
The people's right to vote on tax increases was granted in the 1992 Taxpayer's Bill of Rights. TABOR is one of Colorado's hallmark laws in the last 20 years and has imposed some of the strictest budget limits of any state government.
But on March 16, the Supreme Court issued an opinion in favor of Gov. Bill Ritter on a TABOR case. The plaintiffs had claimed Ritter violated TABOR by freezing school property-tax rates, which otherwise would have dropped, without a vote of the people.
Five of the seven justices signed an opinion that gave the Legislature broad powers in TABOR matters. Eubanks said Wednesday that decision means the Legislature can repeal tax credits the next two years.
It was good news and bad news for the Legislature, said John Ziegler, director of the JBC's staff. The good news is that it creates another possible way to deal with the budget gap.
"The bad news is, you'd have to disappoint all these people who get these exemptions and credits, and I don't think they'd be very happy with you," Ziegler said.
Ziegler gave the committee a list of such tax breaks. They include everything from a $214 million sales-tax exemption for food, enacted during the Great Depression, to the 1943 sales-tax exemptions for newspapers and printer's ink, totaling $10 million a year.
Other sales-tax exemptions:
- Gasoline, totaling $179 million a year.
- Internet access: $13 million a year.
- Vending-machine food: $7.7 million a year.
- Farm-equipment sales: $4.9 million a year.
The six JBC members at first asked only a few questions of Eubanks and Ziegler and did not immediately move to repeal any tax credits.
"Are you forwarding the list to Doug Bruce, by chance?" joked Rep. Don Marostica, R-Loveland.
Bruce wrote the TABOR amendment and has butted heads with legislators for years.
But a few hours later, the JBC made its first move to take advantage of its possible new power. Rep. Mark Ferrandino, D-Denver, asked the JBC to sponsor a bill to repeal a cigarette-tax exemption, and the panel agreed.
In 1969, the Legislature exempted cigarettes from sales taxes, even though they are still subject to an 84 cent-per-pack state excise tax and a $1.01 per-pack federal tax. The sales-tax exemption is worth $30 million a year.
When the cigarette bill is drafted and introduced in the coming days, it will unleash the TABOR debate into the Legislature as a whole.
House Minority Leader Mike May, R-Parker, called the move an "arrogant presumption of authority."
"Today's action shows complete disregard for the intent of TABOR," May said in a written statement. "If the Supreme Court's recent ruling truly does give the legislature this power, then the Supreme Court has overstepped its authority."
TABOR limits state revenue growth by a formula based on inflation and population growth. Voters in 2005 decided to exempt the state from that provision for five years. But the part of TABOR that requires a vote for a "tax policy change" remains in effect.
For years, both the fans and foes of TABOR have interpreted "tax policy change" to mean anything that brings in even a penny extra to the government.
But Wednesday, Eubanks said that conventional wisdom is wrong, in light of the new Supreme Court decision. In a crucial section in the middle of the 45-page opinion, Chief Justice Mary Mullarkey wrote that a vote of the people isn't required unless a tax policy change brings in more money than TABOR's inflation-plus-population limit allows. And because voters put that limit on hold in 2005's Referendum C, the decision means the Legislature can do what it pleases on tax credits until Ref C expires in 2010, Eubanks said.
Anyone could sue over a repealed tax break, but they probably wouldn't win, Eubanks said.
For the Legislature, "The likelihood of success is great" in a court case, she said.