As expected, the recently passed One Big Beautiful Bill Act (OBBBA) is sparking political battles in Colorado, with the two most common misconceptions of the bill’s impact on the Colorado budget being fueled by muddled rhetoric and flimsy logic.
Claim 1: Blame the OBBBA
Colorado’s progressive legislators are out in full force, denouncing the OBBBA for blowing a hole in the state budget, which they must now heroically step in to close.
Due to Colorado’s rolling conformity with federal tax policy, state revenues are decreasing immediately due to taxpayer-friendly changes in the OBBBA. This puts more money back into Colorado taxpayers’ pockets, while leaving a shortfall in the previously-balanced 2025-26 budget.
What they neglect to mention, however, is that the legislature has been aware of a structural budget shortfall for years and was already considering the possibility of a special session before the OBBBA was even passed.
Reality is finally catching up, and potential solutions to filling the budget gap highlight Colorado’s underlying budget problems.
For example, part of Governor Polis’ proposal to close the budget gap is to tap into the state’s reserve.
Hindsight is 20/20, but consider the state’s options during the pandemic, when this budget mess began.
Colorado received an excessive amount of COVID-19 stimulus dollars from the federal government, which could have been used to increase the reserve requirement as a fallback position in case circumstances worsened.
Instead, Polis and the Democrat majority decided to use the one-time relief money to spend freely, create special interest tax breaks, and enact pet projects, many of which would require ongoing funding.
The trend of overpromising and overextending the state’s fiscal capabilities became the norm, and its consequences began to be expressed during the budget-making process by late 2024.
Dipping into the reserve is concerning, but it would not have been necessary if the legislature had been more responsible from the outset.
Ultimately, state government has been growing on borrowed time and funds – the OBBBA is simply forcing a necessary reality check.
Claim 2: TABOR exacerbates budget woes
In an attempt to deflect once again, opposition to the OBBBA inevitably comes with renewed arguments against the Taxpayer’s Bill of Rights (TABOR).
To its opponents, TABOR is a uniquely evil restriction that Coloradans impose on their ability to tax and spend freely.
Actually, TABOR is the simple, and very popular, provision in the state Constitution that allows for a modest limit on the growth of an ever-shrinking portion of the state budget, based on a formula of population plus inflation. It also requires voters’ consent before raising new taxes.
Those crying wolf over the OBBBA claim that if Colorado did not have TABOR, it could simply increase taxes to raise revenue to fill the budget hole.
Saying the quiet part out loud, Colorado legislators want to discard Coloradans’ right to consent to taxation because it forces them into fiscal responsibility.
Ironically, the inflation caused by a flood of federal COVID-19 spending actually facilitated more spending by the state legislature than would have otherwise been the case, thanks to the TABOR formula.
Yet the legislature continues to bite the generous hands that feed it.
A recent report by the Common Sense Institute shows how TABOR-exempt enterprise fees have exploded since TABOR’s inception, providing a convenient and growing means to sidestep voter consent.
Legislators are either ignorant or lying if they think that TABOR’s taxpayer protections are exacerbating Colorado’s budget issues when only 26 percent of the state’s revenues are even subject to its limits.
Despite the OBBBA improving the general welfare of Colorado taxpayers, big government’s defenders treat it as a threat.
Apparently, more money in Coloradans’ pockets, and a little bit less for the state to spend, is just more than politicians can bear.
