Five years ago, legislative Democrats and their allies outside the Capitol warned voters against passing Proposition 116, a 2020 ballot measure that permanently cut income taxes by over $150 million a year.
Teachers union leaders called it “flat-out irresponsible.”
Democratic lawmakers predicted it would mean more cuts to schools, health care and transportation.
Two years later, progressives sounded the alarm again when conservatives put another income tax cut on the ballot, this time with an annual price tag north of $400 million.
“We shouldn’t be making permanent tax cut decisions based on a couple of fat years. Cutting the tax rate now would be foolhardy at best and truly damaging for many Coloradans,” Angela Cobian and Stephen Berman of the Bell Policy Center wrote in a Colorado Sun op-ed.
Both times, voters shrugged off the concerns, backing the tax cuts in landslide votes. Gov. Jared Polis, too, bucked his party and cheered on the tax reductions.
Yet the budget appeared unaffected. State revenue kept growing by more than the state could spend under the Taxpayer’s Bill of Rights spending cap. And Democrats’ warnings about cuts to public services looked overblown.
Until now.
Due to sweeping federal tax cuts signed into law last month by President Donald Trump, Colorado expects to find itself below the TABOR cap for the first time since 2020. That has left lawmakers searching for as much as $800 million in spending cuts or new revenue to close a budget hole created just days into the new fiscal year.
It’s not the first time that statewide income tax cuts passed at a time of TABOR surpluses exacerbated a fiscal crunch shortly thereafter.
With large surpluses to work with in 1999 and 2000, Colorado lawmakers passed two rounds of income tax cuts, slashing the rate from 5% to 4.63%, which is where it stayed until 2020’s Proposition 116.
In the intervening years, TABOR surpluses were rare. Instead, Colorado faced repeated budget crises brought on by two recessions, leading to deep cuts to higher education and the eventual creation of a decade-long K-12 school funding shortfall, known as the budget stabilization factor.
If history repeats itself, we can’t say we weren’t warned.
“History speaks loudly and clearly on how this will play out,” Cobian and Berman wrote in 2022. “In years when revenues under existing rates drop and we are below the TABOR cap, we will sorely miss those dollars.”
The silver lining: unlike the 2000s, Colorado Legislative Council expects the TABOR surplus to return soon. Their latest projections call for $760 million in refunds for the budget year that starts July 2026.
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LAWMAKERS SHARE SOME RESPONSIBILITY
Voters aren’t the only ones who cut taxes in recent years.
State lawmakers slashed local property tax rates repeatedly in response to soaring home values — and to protect against even deeper cuts at the ballot box. Those don’t affect how much tax revenue the state collects, but they still contribute to the budget crisis the state now faces.
When property taxes fall, it reduces local funding for schools and forces the state to pick up the costs. Last year alone, lawmakers cut more than $260 million in school district taxes, shifting those dollars onto a state budget that was already stretched beyond its means.
On the other hand, lawmakers also took steps to prevent a repeat of what happened after the tax cuts in 2000.
In 2024, the Democratic majority faced pressure from Polis and legislative Republicans to cut income taxes while the TABOR surplus was measured in the billions of dollars. But legislative Democrats insisted that the tax cuts be temporary, and only kick in when the state has a large enough TABOR surplus to afford it without cuts to services.
Last tax year, the income tax rate fell temporarily to 4.25%, shaving over $450 million off income tax bills. This year, it’s back up to 4.4% — and after the federal tax cuts, legislative forecasters don’t expect the provision to kick in again for the foreseeable future.
WHAT TO WATCH IN THE WEEK AHEAD
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THE POLITICAL TICKER
8TH CONGRESSIONAL DISTRICT
U.S. Rep. Adriano Espaillat, a New York Democrat and chair of the Congressional Hispanic Caucus, endorsed state Rep. Manny Rutinel in the crowded Democratic primary in Colorado’s 8th Congressional District.
“I was proud to be the first Dominican-American elected to Congress, and I look forward to Manny becoming the second — bringing a powerful voice for Latinos to Washington,” Espaillat said in a written statement. “Expanding Hispanic representation is critical to winning back the House and delivering for our communities, and Manny has the vision, passion, and experience to get it done.”
The endorsement is particularly notable since former U.S. Rep. Yadira Caraveo, who is running to reclaim her seat in the 8th District, was a member of the caucus when she was in Congress. Espaillat was deputy chair at the time.
ELECTION 2026
Democratic activist Michael Neil is running to represent Colorado House District 2. The district is currently represented by state Rep. Steven Woodrow, a Denver Democrat, who recently announced he won’t run for reelection in 2026.
Former state Rep. Terri Carver, a Colorado Springs Republican, has filed to run in 2026 in Senate District 9. That’s the district that used to be represented by Paul Lundeen, the former Senate minority leader. It’s now represented by Republican Lynda Zamora Wilson, who beat out Carver for the vacancy appointment to replace Lundeen.
COLORADO DEMOCRATIC PARTY
The Colorado Democratic Party will host its state assembly next year in Pueblo.
“Pueblo represents the grit, heart, and resolve of Colorado’s working people,” Shad Murib, the party’s chair, said in a written statement. “Holding our state assembly here isn’t just about geography, it’s about values. We’re putting our work where our words are.”
At the March 28 assembly, party activists will select candidates to appear on the Democratic primary ballot in June 2026.
Meanwhile, the party announced Wednesday that it will hold town halls across the state highlighting the effects of the Big Beautiful Bill Act, the Republican federal tax and spending measure, on state finances.
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THIS WEEK’S PODCAST: Purplish: Colorado lawmakers’ conduct is back in the headlines
ELECTION 2026
Immigration ballot measure approved for signature gathering
Law enforcement, including police officers, prison guards and prosecutors, would be required to make a “reasonable effort” to determine whether the people they charge are living in the U.S. illegally under a ballot measure recently approved for signature gathering.
Initiative 95 would give law enforcement 72 hours to inform federal immigration agents if someone they charge is in the country unlawfully if the offense is a so-called crime of violence and/or they have been convicted of a felony in the past. Crimes of violence in Colorado include murder, assault, kidnapping, robbery and first-degree arson.
The 2026 ballot measure would amend the state constitution, meaning it requires the support of 55% of voters to pass.
Placing a measure on the ballot that alters the state constitution requires 125,000 voter signatures, including ones from at least 2% of the voters in each of Colorado’s 35 state Senate districts. That task can cost millions of dollars.
The proponents of the measure, Michael Fields and Suzanne Taheri, have until Dec. 26 to turn in their signatures.
Fields leads the conservative political nonprofit Advance Colorado, and Taheri is a Republican attorney who often works with Fields on ballot measures.
COMING UP
The backers of Initiative 13, which would ask voters in 2026 to halt the reintroduction of gray wolves, have until Aug. 27 to turn in roughly 125,000 voter signatures to make the ballot next year. We’re just noting it because that deadline for the statutory initiative is fast approaching.
THE BIGGER PICTURE
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