 your co-host today again or with Talking Tax. We're right here on Think Tech Hawaii, and your favorite community affairs programming. And Talking Tax is all about taxes, as you might have guessed. And the co-host with me is Tom Yamachika, he's president of the Tax Foundation of Hawaii. I'm with the Grass Street Institute of Hawaii. We have similar goals in some ways, but Tom is usually really just focused only on taxes. And that, of course, is what we're talking about today. We also have a very special guest, Rhonda Sparlin from Denver, Colorado. She's a partner in the state and local tax services group of Reuben Brown, which is based in Denver. She's joining us today from Denver. And she's going to talk with us today about Colorado's tax situation. They have a really interesting program there called the Taxpayer Bill of Rights, which helps limit government spending by putting a cap on tax increases. Tom Yamachika, Tom wrote about this in his weekly column a couple of weeks ago talking about, based on the governors, Jared Paul is Colorado governor's state of the state address, in which he actually called for tax cuts. And Jared is a Democrat, so we're kind of hoping that would rub off on our Democratic governor, who in fact has proposed some pretty significant tax cuts for this year, it may arose last year, and we hope that that will go through. But anyway, let's start talking about this column and how it all relates to Colorado. Tom, you want to set up the stage there? Well, sure. What we're talking about today is Colorado. It's a, I don't know if you could call it a blue state like ours, definitely it's not as blue as we are, but it has a Democratic governor. And one of the things that caught my attention about Colorado this year is the state of the state address that Governor Paulus gave. And we'll talk about that in a moment. But I also wanted to give some other detail about our special guest today, Rhonda Sparlin, is with Ruben Brown. Ruben Brown I think is headquartered in St. Louis, but it's all over the United States. And Rhonda is the partner in charge of state tax firmwide. Right, correct. So she is a celebrity within Ruben Brown and for us too. And she's the greatest Colorado tax petition director who ever walked the face of the earth, in my humble opinion. So what we want to talk today about is this passage from Governor Paulus' state of the state address. He said, as demonstrated by our healthy T-Bor, T-Bor being taxpayer bill of rights surplus in Colorado, taxes are simply too high. Income taxes, property taxes, and the state sales tax. We ignore that signal at our own peril and I challenge Democrats and Republicans to work together to improve our economic growth and success by not taking taxes we can't keep from people and instead working on a bold balanced progressive package, including cutting the income tax rate, which by the way, is that like 4%? It's 4.4%, yes. So it's not very high to begin with. It's not very high. It's like one of the lowest. Yeah, I mean, here in Hawaii we're talking about it's a top rate of 11%. Yes, right. Yeah, I was, and that's just the income tax rate. I mean, I was comparing the tax burden, you might say the whole tax burden of Colorado against other states and not just the income tax and depending on whether it's Wallet Hub or Tax Foundation, they come in very low like fifth, you know, for Wallet Hub at 8.59% of all, you know, that's the total tax burden, 8.5%, and Tax Foundation, it's 9.7%. They would rank number six in terms of the states there. Whereas Hawaii, Tax Foundation, we're almost 15%, 14.99%, and according to Wallet Hub, we're 12.29%. And that puts us up at 48% for the Tax Foundation, number 48 highest tax burden, followed by Connecticut and New York and Wallet Hub. Oh, if you think that's something, if you think that's something, Wallet Hub put out a list recently about, you know, which states take the, you know, take the top tax burden of low-income taxpayers, high-income taxpayers, and those in the middle. And one state and only one state was in the bottom five of all three lists. Wow. And guess what? And Colorado was way up there. Oh, hi. Colorado was way up there. So, Rhonda, tell us a little bit about the background of, you know, Tabor and what's been going on in Colorado. Yeah. So let's do talk about that because I think while each of you are, you know, pointing this out and pointing out this analysis, I honestly, I don't know that it's truly reflective of what's happening in the state. You know, I think, Tom, and you and I both know the devil is typically in the details, right? And so, you know, I think that there's a lot that's happening. Yes, we have a flat 4.4% income tax rate that has dropped to that level over, you know, through a number of voter initiatives, as well as legislative initiatives, you know, or passage of laws by the legislature over the years, quite honestly, over a couple of decades. But at the same time, we have a state, and again, we have pretty reasonable state sales tax rates. We have a very low state sales tax rate of 2.9%. And then if you're in the Denver metropolitan area, you've got special districts that are an additional 1.1%. So a total of 4% in the metropolitan district that's, you know, pretty much collected by the state. But then we have almost 70 home rural cities who it's like having 70 states in the state of Colorado from a sales tax perspective. And those rates are anywhere from 3% to like 5.5%. And so while the rates may be in line with what you see in other states, the complexity level for businesses to operate in Colorado is tremendous compared to other states. And then, and very quickly, and also I just came back from a Colorado chamber board meeting where, and you should have seen or would possibly heard, you know, there was a special session of the legislature called by the governor at the end of November, beginning of December last year. And we've had an interim council on property tax reform and they just gave their recommendations, I believe last Friday because our property tax rates are increasing tremendously as well as the valuations. And so, you know, just the number I can remember that was thrown out that's just expected this year is almost another $3.8 billion of property tax revenues just because kind of the foundational structure of how property taxes and in the various special districts and all the mill levies that get piled on top of those valuation increases. Well, if I may just to be clear, are you trying to say that because the various metropolitan areas, do they, they can levy their own sales taxes? Is that what you're saying? Yes. And the counties collect the property taxes there, right? Yes. Right. But okay, so that analysis though that I was mentioning was local and state and local tax burden. But what you're saying is even though it's really wonderful, there's always that push to keep raising taxes, right? That's right. Or that they can, or that the complexity because, because it's like dealing with, you know, you could have a state exemption for affordable housing. You could have a state exemption for projects that are structured a certain way and that meet the affordable housing need in our state. But the local, if it's in a, if it's in a jurisdiction where it's a local home rule city, they may not honor that exemption. And so, you know, you could have about 5% of the cost of that affordable housing project, basically go back to the government through sales taxes on the cost of materials and the construction materials and reconstruction and that type of thing. And so it increases, it's an, it's an artificially, it's increasing the cost of what, you know, they're trying to get affordable housing, but then there's a certain percentage of that that's going back to the government through the sales taxes or other taxes. Well, I guess the overarching principle though is that you have Tabor. Yes. Tabor, which is a constitutional provision. It is, it is. And it's, you know, you're going to get historical on me now or maybe I'm going to get historical on you, but go for it. It goes back to, you know, 1992. And again, we have local control through these sales taxes and other taxes. And there were a number of things that Tabor was meant to do. It was first off to, to try to limit the growth of government. You know, the un, the, the un, try with some guardrails about the growth of government in the state of Colorado. And that meant if there were laws that they wanted to pass through that would have a direct or indirect increase in the tax burden, they needed to be voted on by the electorate before they could pass. I would tell you that that, that, that's one of the provisions. There were other provisions, but that's probably, you know, one of the main provisions that everyone's aware of. And I will tell you that that's lost some of its, it's not as strong as it used to be. There have been some court cases over the decades that have limited, have said, look, if, you know, for instance, in the legislature, if you want to have a bill that increases tax, maybe increases the sales tax, broadens the sales tax base, but then in that same bill, you give, you increase the earned income tax credit or the childcare credit in the state of Colorado, those can offset. You know, you will have our legislative, you know, legislative analysis group do the analysis, but those could potentially offset and those don't have to be voted on. So you can have, you can have these tax increases in particular sectors, corporate, you know, corporate or business taxes versus individual taxes, as long as they're in the same bill and they, they have a neutral impact, then, you know, maybe you don't require a vote of the people. Well, but I think the, the remarkable thing is that you have guardrails in the first place. Right. You know, a lot of states don't, we don't. Right. And, and, and there was, and I know because I participated in this as, you know, with, with the NFI be amicus brief, there was litigation over, you know, the question of whether, you know, Tabor is constitutional at all, because, you know, a group of legislators were saying, well, look, the US Constitution guarantees this Republican former government. And that means we, the legislature gets the tax people, however we want, and with no limits. And the Supreme Court basically said, no. The people have the power. Right. Well, people have the power. Voting part, this voting part of the, if, if the legislature passes a tax increase or would like to pass tax increase, it's supposed to go to the vote. But what is that? Is that, do they have to wait till the following November? I mean, I'm not sure what the timeframe. Yeah. Yeah. So it becomes an initiative and we have, we have a, so I know there are referendums and there are initiatives and I will just say, you know, I will, you know, I kind of view it as, and I'll probably get this wrong because I am, I'm, I'm like both of you where you're used to doing these, these podcasts and your journalist and you, you've got all the terms correct. I'm a tax practitioner. So I kind of understand that there can be valid issues that either come from citizen groups or groups that get signatures of citizens or they can come from the legislature and be on the ballot. And so we, we have typically, honestly, I cannot remember an election, a November election for years now where there isn't something on our ballots in Colorado that deals with some aspect of taxes. And in fact, oh, we, at this meeting, I was just at earlier today. I mean, there's, there's probably four, there's anywhere from four to six, to six different property tax proposals that they're working through with the title board, the different groups are negotiating to which one will show up on the ballot. So does that apply to even County property tax increases? Or city or whoever who is the counties over there that raise property taxes? Yeah. So they, well, yes, there, well, there's all kinds of districts, water districts, fire districts, collective school districts, you know, the counties, that type of thing. So it, it applies. However, there's also, so this Tabor was the brainchild of a former legislator named Doug Bruce. And so it was also determined in the decade since it passed that local jurisdictions could have elections where again, the folks who live in that locality could choose to debruce as it's been called now because what it, what it basically was it was elections that would allow the localities to keep this excess revenue and to get back to what Tom read at the beginning of this podcast. You know, what happens at the state level is we typically get an income tax refund. There's a refund for everyone who files a personal income tax, a refund of a certain dollar amount, depending on how big that Tabor excess revenue is. And so at the local level, they can just vote to keep that. They can go through a vote and keep that. And so, yes, it does apply. However, most of the counties to my understanding have had, have held those types of elections and their electorate have said, if we, if we pay you too much, if it's growing too greatly, you can keep that excess revenue and put it to good work. I see. So is that what, is that what the, I was going to ask you, what is, what did the governor mean when he was talking about our healthy Tabor surplus? Right. Right. Is that, is that, so this gets, this gets, there's a standard. There's a certain limitation in Tabor about how, what the growth of state revenues can be, general fund revenues can be. And if every time, if the economy is going, growing well, again, you know, with sales tax collections have grown significantly, all of that general refund revenue or in the population has grown all of those things. If we grow above a certain limitation, then those are excess revenues. And there are certain refund mechanisms that apply when you hit certain levels. But at a certain point, if it's above all of those, then again, on the individual income tax returns, every individual, every resident individual who's filing an income tax return gets a specified dollar amount. And I'll tell you again, in some years, you know, it's, it, some years it's been, it's been phased according to what your level of income was. And maybe at the highest levels, maybe it was $50 or $70 or something like that. This year is $800. Nice. And it's, and that's for everyone. And what are the things that, that support this activity? I mean that, you know, what if they don't, are there any penalties? Is there a way that they can violate this Tabor? They've been trying for years. Yeah, I mean, it's, you know what it is really, Mark, I think it's, it just shows that it can easily, there can easily be a mismatch of the revenues and the tax revenues that are paid to the state or the localities. There can be a mismatch of that versus who bears the cost of the services. So for instance, you know, while the state gets all of the income tax revenues and gets, you know, a small portion of the sales tax revenues and that type of thing, you know, the localities in the counties, as you've mentioned a couple of times, they're the ones who are collecting the property taxes and they're the ones who are trying to provide all the local services and the, you know, so while the state may be flush with money, depending on a particular locality's demographic, they could have extreme needs and the monies aren't being, you know, they're not getting the surplus of funds to be able to meet those needs. You can compare that with what happens here in Hawaii. It's very, very different. I mean, we have a so-called general fund expenditure ceiling, but that can be overwritten by, I believe, a majority of the legislature and it happens every year. Two thirds. Two thirds, yeah, it happens every year. And we have a provision calling for, you know, excess monies to be refunded to the taxpayers, but they've amended that constitutional provision over the years so it can, you know, it can go to other things like other post-employment benefits during the day fund. So, and even when there were none of these other alternatives, the legislature complied with the constitutional mandate by giving taxpayers a refund of one dollar. One dollar. One dollar, yeah. Yeah, it was pretty swiney. Yeah, I mean, that's I think what, you know, one difference between, you know, Colorado and us is that we've got more slimy legislators. And the thing is, too, is there is no penalty, really, for exceeding the budget. Like Tom said, if they, there is a cap in the Constitution, but if they can all vote, in fact, the bills even go through sometimes now with a statement. And this bill will push us into the, you know, excess, exceed the limit, the budget limit. And they all just go along with that. You know, one of the virtues of a one-party state, I guess, pretty much. Right. Well, and please understand. I mean, when Tabor went into effect, it was a much more balanced government in Colorado. We're also a blue state where governor is Democratic, both houses of our legislature are Democratic. And the last election, every key office on the ballot at the state level was, you know, voted Democratic. So this has been happening. And we've been in that type of atmosphere or environment now for eight to 12 years. Well, apparently the governor there is somewhat of a libertarian. It sounds like he's, you know, maybe more Akamai about the economics, the principles of economics. But Tom did make the point in his column and that Democrats cutting taxes is not unheard of. And like I said, our own governor is proposing, I think it's about a $200 million tax cut. He wants to raise the standard deduction and the personal something else. And then he wants to index everything to inflation. Do they do that, by the way, in Colorado? The tax rates to inflation? Not the tax rates, but many of the other like the legislature has become very keen or very smart about that in the last few years. So that when they are putting some new provision into the tax law, they are making and it sets, you know, a threshold. They are making sure to put in the language as well that this will be subject to revision according to inflation based upon certain indicators so that it can grow, which is really important because I think again what we see as tax practitioners is even $100,000 that went into effect for a sales tax threshold in the last five or six years, I mean that $100,000 doesn't have the same meaning as what it had five or six years ago. Well, according to your governor in the speech that Tom cited, he said that President Kennedy didn't just launch the moonshot, he delivered one of the largest income tax cuts in history and he also talked to Tom about President Obama's calls for cutting income tax. Did he ever do that? Did Obama ever do that? Or was he just calling for it? Boy, that would be difficult for me. I'm a little bit stuck on what the memory exactly, I'd hate to say, I'd hate to speculate. And then they always talk about the Reagan tax cuts, but then I get different signals on that that maybe overall the spending did go up and whatever. I'm not really sure about that part of history either, but in Hawaii Tom, do you think Governor Green is on the right track or he could do more, right? Well, I mean what's the situation perhaps? He can only do what the legislature lets him, you know, I mean it's got to be a cooperative environment for anything to go through. That's true. So last year he proposed it didn't go through, this year he's proposing it again we'll see what happens, the jury's still out. Right. Well, what about a possibility of ever getting a table for Hawaii? That I think would be very interesting if we could, you know, get something in our Constitution that, you know, didn't have loopholes and ways around it and backdoor strategies that we've always been using up to this point. Do you think people in Hawaii would support that? Being a thing that would have to go to the voters? Of course it would have to go to the voters and yeah, I think they would support it. But I don't think that any existing legislator would want to put that before the people. No, we just have to find somebody, don't we? And so, Rhonda, thank you so much for being with us today. It was really nice. I know you and Tom used to work together with Price Waterhouse Cooper and accounting firm and you were never here in Hawaii of course, but you know, you're always welcome to come visit. Have you ever been to Hawaii? Oh, multiple times. It's one of my favorite places on earth. I love the big island. That's, that is just kind of, I would love to be there. Give me about four weeks. I would love to be there. I don't have that plan, but I just, I just every island, I've been I've been on a number of your islands and I just again, one of the greatest places on earth. Yeah, it's next season has to end first. That's right. Well, thank you again Rhonda for being here today and Tom good to see you again and we'll see you next week. Everybody, everybody next week or two weeks from now, I hope or whenever this next episode comes out. Thank you very much for joining us today on Talking Tax on ThinkTek Hawaii. 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