How Colorado Voters Put a Leash on Their Own Legislature

Most voters spend their lives asking the legislature to behave. Letters, phone calls, town halls, the occasional strongly worded editorial. Colorado voters tried something different in 1992. They looked at the legislature, looked at the constitution, and decided that the fastest way to get politicians to behave was to take away the keys and hand them to the voters.

The result was the Taxpayer's Bill of Rights, universally known as TABOR, and it may be the most consequential tax-limitation measure ever written into a state constitution. It says that the government of Colorado cannot raise a tax, increase a rate or keep revenue beyond a set limit unless the people say yes. Think about how unusual that is. Most governments treat tax increases the way a teenager treats a credit card: someone else will deal with the statement. Colorado decided the statement should go to the voters first.

This is a story with heroes and villains, depending on whom you ask, and I am not going to pretend it has only one side. It begins with a revolt, runs through a clever formula, hits a recession, and ends with the voters themselves loosening the leash they had tightened. Along the way, other states looked, borrowed some pieces and left others on the table. Let's tell it in order.

The setting: a country in a tax revolt

To understand TABOR, you have to remember what the late 1970s and 1980s did to American state politics. In June 1978, California voters passed Proposition 13, which capped property taxes, and politicians in every state noticed. We tell that story in Proposition 13 and the Tax Revolt That Rattled Every Statehouse. In the years that followed, voters in other states wrote limits of their own. Michigan adopted the Headlee Amendment in 1978. Missouri adopted the Hancock Amendment in 1980. The message was the same everywhere: voters wanted a seat at the table when the government decided how much of their money to take.

Colorado had its own version of the argument. It was a growing state, with property values and populations rising, and a legislature that found it easy to spend the growth. A tax-limitation activist from Colorado Springs named Douglas Bruce became the face of the effort. He wrote the measure and carried the campaign, and he had a gift for the blunt, sharp phrase that makes a measure memorable. Supporters saw a citizen standing up to an unresponsive government. Opponents saw an agitator with a one-note song. Both descriptions are fair, and neither explains why the measure passed.

It passed because the idea is simple and the grievance was real. Voters did not need a seminar to understand a rule that said: if you want to take more of my money, you have to ask me.

The campaign and the vote

TABOR appeared on the November 1992 ballot as Amendment 1. Opponents argued that it would tie the hands of state and local governments, that schools and roads would suffer, and that a constitutional formula was too rigid to survive changing conditions. Supporters argued that government had grown faster than families' paychecks, that elected officials needed a hard limit, and that voters could be trusted to approve what they thought was worth paying for.

Voters approved it. It became Article X, Section 20 of the Colorado Constitution. A constitutional amendment adopted by initiative can be changed only by another vote of the people, which is exactly what its authors intended. The legislature cannot repeal TABOR. It cannot amend it. It cannot decide that the rules are inconvenient this year. Only voters can.

What TABOR actually says

Here are the main provisions in plain language. Read the text itself, which is available on the Colorado General Assembly's website, because the details matter.

1. Voter approval for new taxes. Any new tax, tax rate increase, mill levy increase above the prior year, extension of an expiring tax, or tax policy change that results in a net tax revenue gain requires voter approval in advance.
2. A revenue limit. The state's revenue growth is limited to inflation plus population growth. Local governments have a similar limit tied to inflation and local growth, such as new construction.
3. Refunds of the excess. If revenue exceeds the limit, the excess must be refunded to taxpayers unless voters approve keeping it.
4. Voter approval for debt. Multiple-year borrowing needs voter approval, with exceptions for refinancing at a lower rate.
5. An emergency reserve. Governments must hold a reserve for declared emergencies, set at a percentage of the spending base, and it cannot be used for economic downturns.

That fifth provision matters. TABOR's authors wanted a cushion for disasters, not a fund for recessions.

How the formula works

Let me walk through a hypothetical, with invented numbers, so you can see the mechanism.

Suppose the state's allowed revenue in Year 1 is $10.0 billion. In Year 2, inflation is 3 percent and population growth is 1.5 percent. The allowed growth is 3 + 1.5 = 4.5 percent. The Year 2 limit is 10.0 × 1.045 = $10.45 billion.

If the economy booms and the state collects $10.7 billion, the excess is 10.7 − 10.45 = $0.25 billion, or $250 million. Under TABOR, that money goes back to taxpayers unless the voters decide the state should keep it.

So far, a simple rule. Now the problem: the way the original formula worked, the base for next year's limit was the prior year's actual revenue, not the prior year's limit. That produced what became known as the ratchet effect.

The ratchet and the recession

Here is the ratchet in numbers, again hypothetical. Say in Year 3 a recession hits and revenue falls to $9.8 billion, below the limit. The Year 4 limit is based on that lower figure: 9.8 × 1.045 = $10.241 billion. (Check: 9.8 + 9.8 × 0.045 = 9.8 + 0.441 = 10.241.)

Now suppose the economy snaps back and the state collects $10.6 billion in Year 4. The state's old trend line would have allowed more, but the formula's base is the recession figure. The excess is 10.6 − 10.241 = $0.359 billion, or $359 million, and under the rule it is refunded. The government comes out of the recession with a lower ceiling than the economy would justify, and the lower ceiling sticks.

Critics said this was the flaw that made TABOR unworkable. Revenue dips in a recession, the base falls, the recovery produces refunds, and the budget never gets back to the level it needs to pay for the programs it already runs. Supporters answered that it was the whole point: a government that learns to live with less in a bad year should not feel entitled to spend the whole rebound.

Colorado hit exactly that situation in the early 2000s. A recession arrived while the ratchet was already working, revenue fell, and the limit fell with it. Critics argued that this squeezed higher education, transportation and other priorities. I am going to give them the credit they deserve: the squeeze was real, and the arguments that TABOR constrained the budget in a downturn were not made up. The question was whether the cure was to abolish the limit or to fix the mechanism.

Referendum C, 2005

The cure arrived at the ballot box. In November 2005, Colorado voters approved Referendum C. It allowed the state to keep the revenue above the TABOR limit for five years, and after that period it set a new, higher cap based on the highest revenue year in that stretch, with growth limited from that point on. In practice, it suspended TABOR's refund requirement for the state and relaxed the ratchet.

The politics are worth noting because they cut across party lines in an interesting way. Governor Bill Owens, a Republican, supported Referendum C, arguing that the state needed room to recover from the recession and that voters were being asked to approve it in the open. Douglas Bruce, TABOR's author, opposed it, arguing that it gutted the principle. That is the Republican family argument in miniature: one side says the principle is the principle, and the other says a principle has to survive contact with the roads and the classrooms.

What did the vote prove? Two things, and both are worth keeping.

1. The system worked as designed. The legislature could not loosen TABOR. Only voters could. And voters were asked directly, after a full public argument, whether to let the government keep more. They said yes, for a limited purpose and a limited time. That is the leash in action. It does not strangle the dog. It makes the owner decide where it goes.
2. The people are not fanatics. Voters who passed a tax limit in 1992 were willing to loosen it in 2005 when they saw a reason. That is what a healthy check looks like. It is not a straitjacket; it is a vote.

Colorado voters were asked again in 2019 whether to let the state keep revenue above the limit permanently, under Proposition CC. They declined. That is a history lesson as well: the voters gave the state room once, for a reason, and declined to give it a blank check.

What other states copied, and what they left behind

TABOR is often called the toughest tax and spending limit in the country, and other states looked at it with interest. Here is how the picture shaped up.

• Voter approval of tax increases. Several states require voter approval or a legislative supermajority for tax increases. Oklahoma's State Question 640, approved in 1992, requires either a three-fourths vote of the legislature or a vote of the people for revenue-raising measures. That is a sibling of TABOR's first provision.
• Spending or revenue limits. Missouri's Hancock Amendment and Michigan's Headlee Amendment, both older than TABOR, limit revenue growth and require refunds or voter approval when the limit is exceeded. TABOR took the idea further than they had.
• The TABOR campaign elsewhere. In 2006, TABOR-style initiatives were put before voters in Maine, Nebraska and Oregon, and voters rejected them. The sales pitch was strong, but a rule that binds the state and local governments permanently is a hard thing to ask voters to accept.

The common pattern is that voters like the idea of a say over taxes, and they are more cautious about a rigid formula that applies in all weather. The states that copied the principle usually softened the mechanism.

The fair argument against spending limits

Let me state the best case against TABOR, and then answer it.

Spending limits, the critic says, are crude. A formula based on inflation and population does not know about a wave of retirees, an aging bridge, a surge in college enrollment or a drop in federal aid. Costs in health care and education rise faster than general inflation, so a limit pegged to inflation squeezes the programs that grow fastest. The limit also freezes in place the priorities of the year when it was written. And if a revenue limit makes it hard to invest in roads, schools and public safety, a state may lose its edge against states that spend more wisely.

That is a fair argument, and part of it is true. A formula is not wisdom. Health care costs do rise faster than inflation in many years, and a limit pegged to inflation can force trade-offs.

Here is the answer. First, a formula that forces trade-offs is a feature, not a bug, because every trade-off is a decision a legislature must defend in public, instead of papering over with a tax. Second, TABOR does not freeze spending. It limits revenue growth unless voters agree to more, which means a government with a good case can make that case on the ballot. Third, the formula can be adjusted, and Colorado adjusted it by the best method available, a vote of the people. And fourth, no limit is a substitute for judgment. A state with a limit still has to spend the money well. The limit's job is to keep the argument honest.

What it means for the rest of us

If you live outside Colorado, the lesson is not that your state must copy TABOR. It is that a state can decide who holds the leash. In states with the initiative, voters can write a limit into the constitution, as we describe in How a Citizen Initiative Gets on the Ballot, Signature by Signature. In states without it, the same effect comes from legislative supermajority rules. Either way, the question to ask is who has to say yes when government wants more.

And if you are weighing a tax limit in your own state, read the formula, not the slogan. Ask what happens in a recession, who can change the rule, and what refunds look like. Our piece on Why Your State Cannot Print Money the Way Washington Does shows why a state's discipline matters, and Work Out Your Own Property Tax Bill With Mill Rates and Exemptions shows how a limit on local property taxes reaches your own bill.

The bottom line

• TABOR, adopted in 1992, requires voter approval for tax increases and limits revenue growth to inflation plus population growth, with the excess refunded unless voters say otherwise. It put the leash in the voters' hands.
• The ratchet effect was a real flaw: a recession lowered the base and the lower base stuck. Voters fixed it through Referendum C in 2005, which shows the system can be corrected without a legislature's say-so.
• A fair critic can say that formulas are crude and squeeze fast-growing costs. The answer is not to scrap the principle but to make the case on the ballot.
• Before you vote on any tax limit in your own state, read the formula, ask what happens in a downturn, and ask who gets to change the rule.