Colorado Tax Cuts Act, Amendment 21 (2000)
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Text of measure
The language that appeared on the ballot:
Initiative Constitutional Amendment Analysis by Colorado Legislative Council: cuts the taxes which fund certain basic local and state services by $25 per year including property, income, utility, and vehicle taxes; increases the amount of each tax cut by $25 per year in perpetuity or until the tax and the services paid for by the tax are eliminated or until the services are paid for in some other way; prohibits the provisions of the proposal from reducing the amount of state or local revenue that must be refunded to taxpayers under current law; and requires that a husband and wife each receive the tax cuts that affect state income taxes.
Background and Provisions of the Proposal: The proposal provides for an initial $25 tax cut for several local and state taxes. Most of the local and state taxes which this proposal will reduce are used to provide government services including: fire protection, law enforcement, libraries, schools, highway and mass transit projects, prisons, and other special district services like emergency and hospital care, water, and soil conservation. A portion of the taxes are allocated for other specific purposes, such as the repayment of bonds. When the local and state governments each impose a particular tax, the tax cut applies to each tax imposed. The amount of each tax cut increases by $25 per year, up to the amount of the tax paid. For example, if an annual tax bill is $70, the tax will be reduced $25 in the first year and $50 in the second year, and the tax bill will only be eligible for an additional $20 cut in the third year.
Property tax. All counties and school districts and most cities and special districts impose a property tax. Property taxes are reduced in two ways. First, each local government's tax is directly reduced, and then it is reduced to rebate any sales tax revenue collected by the local government on food and nonalcoholic beverages sold at grocery stores and restaurants. Most property owners pay property taxes. Property taxes are paid to multiple local governments, and the tax cuts will apply to each government’s property tax. Owners of multiple properties are entitled to tax cuts for each property. The property tax cuts begin with bills received in 2002.
Income tax. Three of the tax cuts affect the state's income tax. First, individual and corporate income taxes are directly cut. Next, income taxes are cut to return the amount of sales tax that the state collects on food and nonalcoholic beverages sold at restaurants. Finally, income taxes are cut to return the money the state receives from the estate tax. The amount returned for taxes on food and nonalcoholic beverages is expected to increase to $75 per taxpayer in the third year, but to less than $100 in the fourth year. The amount returned for estate taxes is expected to be $25 in the first year, but less than $50 in the second year. The income tax cuts begin with income tax returns filed in 2002.
Utility taxes and charges. This proposal affects taxes and franchise charges paid on utility services. While the proposal does not define “utility,” common examples of a utility are gas, electric, and telephone service providers. Homeowners and renters do not pay state sales taxes on their gas and electric bills, but in most cases pay local taxes on these bills. Telephone bills can include sales taxes for services for regular telephones, cellular telephones, pagers, and other telecommunications equipment. The tax cuts for utility taxes and charges begin in 2001.
Vehicle taxes. The state, a few special districts such as RTD and the baseball stadium district, and most cities and counties impose a sales tax when a vehicle is purchased. The tax cut applies to the state sales tax and each local sales tax. In addition to sales tax, a vehicle ownership tax is paid annually when a vehicle is registered. Revenue from the vehicle ownership tax is allocated to local governments that collect property taxes. The vehicle ownership tax declines as a vehicle ages. The tax cut for each vehicle tax begins in 2001.
Impact of proposal on taxpayers and governments. The tax cuts would total $234 million in 2001, $843 million in 2002, and $1.3 billion in 2003.
The actual tax reductions for any household will depend on several factors. Some of these factors are the number and age of vehicles owned, vehicle purchases, actual utility expenses, the local sales tax rates, the number of property tax districts and their mill levies, and whether a taxpayer owns property and pays income taxes. Tax reductions that occur due to this proposal do not take into account increases in federal income taxes for those taxpayers who deduct their property, income, and vehicle ownership taxes.
State replacement of local revenue. This proposal does not require the state to replace the money that local governments will lose as a result of this proposal. However, this proposal does prohibit the state from using TABOR-related excess revenues to replace the revenue that will be lost by local governments due to this proposal. Without state replacement of lost local revenue, and absent a voter-approved increase in the tax rate, many local governments will face significant declines in revenue.
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