Colorado can expect a “soft landing” from the recent inflationary spike and a lower chance of a recession in the near future, state economists predicted in a forecast released Wednesday.
They also expect required tax refunds to remain high, amounting to hundreds of dollars per taxpayer through the next several years as Colorado returns collections that come in above a constitutional limit.
In all, the economists who produced forecasts for the legislature and the governor’s budget office predicted the state would return to more typical budgetary and economic conditions after years of wild fluctuation stemming from the pandemic.
“We are back to a very normal budget cycle,” Mark Ferrandino, Gov. Jared Polis’ budget director, told lawmakers Wednesday morning. “In the last three years, we’ve had COVID, with very tough cuts, and then two years with the influx of money from the federal government that is not there anymore.”
The separate legislative economic forecast anticipates individual taxpayers will receive between $586 and $1,834 in refunds this tax year, depending on their income, due to the revenue cap set by the Taxpayer’s Bill of Rights.
That prediction uses the default sales tax refund mechanism that breaks taxpayers into six income tiers. Under that system, higher-income taxpayers receive higher refunds because they paid more in taxes.
Those refunds are expected to decline in coming years but still amount to between $268 and $846 per taxpayer for the 2024 tax year. For the 2026 tax year, they’d range from $359 to $1,134 per taxpayer.
While tax refunds after this year may not reach the heights seen recently, they still represent the state hitting the limits of financial growth — and demonstrate TABOR either is working as intended or burdening Colorado in ways other states aren’t constrained, depending on one’s outlook.
“We have to balance those TABOR refunds with the fact that we’re just not going to be able to take advantage of the growing economy in Colorado as other states are able to take advantage of it,” said state Sen. Rachel Zenzinger, an Arvada Democrat and the chair of the Joint Budget Committee, which heard the forecasts Wednesday morning.
The presentations did not account for Proposition HH, which would change the state’s revenue cap and would have short- and long-term effects on TABOR refunds. The forecasts only factor in current law. Voters will decide that question in the November election.
The ballot measure is aimed at blunting expected spikes in property taxes next year and offsetting losses in property tax revenue for local governments. If passed, it would increase the revenue cap set by TABOR by 1 percentage point, allowing the state to keep and spend more revenue each year.
It also would flatten upcoming TABOR refunds to an equal amount for all taxpayers, versus the default six-tier system based on income. Greg Sobetski, the legislature’s chief economist, said his office predicts flat TABOR refunds would tally about $833 per taxpayer if Proposition HH passes.
The state Department of Revenue sets the final amount and will report that in coming weeks. Proposition HH’s effect on TABOR refunds in coming years — and the presumption that it would chew into them significantly — has been a key message for the campaign opposing the measure.
State Rep. Rod Bockenfeld, a Watkins Republican and member of the Joint Budget Committee, called the new projections a “positive forecast.” He also tied the predictions back to Proposition HH and warned of its effects on future refunds.
“It’s important to see there are still TABOR refunds projected into the future,” Bockenfeld said, noting that refund projections are typically fairly conservative this far out.
Future refunds could outpace any property tax relief people see, Bockenfeld said, calling the proposition “a scheme that has an impact on future Taxpayer’s Bill of Rights refunds, which is a tax increase when you take those away.”
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