Colorado voters rejected a bid to remove the spending caps in the Taxpayer’s Bill of Rights — but the fiscal fight is only expected to get more intense in the next year.

One interest group is considering a repeal of the Taxpayer’s Bill of Rights and another is testing ideas for a graduated tax system that increases rates for the wealthy. Both are eyeing the 2020 ballot and appear undeterred by Proposition CC’s defeat this year.

“Whatever we do next must be bold enough to drown out the alarmists. That work begins today,” said Scott Wasserman at the Bell Policy Center, the organization seeking to overhaul the tax system, in a statement.

“If we truly want to build a state that works for everyone, then we need to amend the constitution,” added Carol Hedges at the Colorado Fiscal Institute, which is working to unwind TABOR.

ELECTION: TABOR stands strong in Colorado as Proposition CC fails and voters refuse to allow more state spending

Prop. CC constituted the most substantial challenge to TABOR since voters put it into the state constitution in 1992 because it would have removed limits on spending. A lackluster campaign for its passage, motivated opposition and voter confusion contributed to its defeat by a significant margin on Tuesday, with 55% voting no and 45% in favor, preliminary election results show.

TABOR’s defenders suggested the 2019 election serves as a rebuke to Democrats and indicates that voters are not in the mood for major tax changes. But the 2020 election is a different contest because increased turnout generated by President Donald Trump’s reelection bid is expected to favor Democrats.

(Hover over each county to see the vote totals.)

“Knowing that … we’re going to have to fight against the full repeal of TABOR, I think this just gives us momentum,” said Michael Fields of Colorado Rising, one of three groups that worked to defeat Prop. CC.

To counter the liberal measures, TABOR supporters are considering putting their own initiative on the ballot — one that would require voter approval for any fee increases that generate more than $100 million.

“I think we’re going to be aggressive on our side to try to get something like that on the ballot,” Fields said. “We’re thinking about trying to get something like that and in the next few years, if not next year.”

Prop. CC’s defeat is “first step” to bigger ballot questions

A ballot battle on fiscal issues is not new in Colorado. TABOR requires voter approval for all tax hikes and often pits competing measures against each other, as in 2018 when voters rejected two different proposals to increase transportation spending even as Democrats cruised to historic victories.

The advocates for Prop. CC acknowledged the huge importance of the question on this year’s ballot, suggesting it was a pivotal test for broader tax changes. “I just don’t think we can afford to lose,” said Dan Ritchie, who contributed $1 million to the campaign.

MORE: Here’s what you should know about TABOR’s impact on state spending

But in conceding defeat, the proponents put a positive spin on the contest, pledging not to shrink from another fight in the near future.

“We didn’t win tonight, but we advanced this conversation in such an important way,” said state House Speaker KC Becker, a Democrat from Boulder who authored this year’s ballot measure.

Colorado voters, she said, are more aware about the huge swath of districts on four-day school weeks, in part by budget constraints. And likewise, people are beginning to recognize the huge cost shift onto college students and the state’s poor ratings for its roads.

House Speaker KC Becker, center, concedes the defeat of Proposition CC at election night event Nov. 5, 2019. The Boulder Democrat was one of the lead supporters for the ballot initiatives. (John Frank, The Colorado Sun)

“I’m sad we lost, but I absolutely know that this was an important first step,” Becker said.

The preparations for the next step began well before Election Day. The two advocacy organizations pushing for an overhaul to Colorado’s unique laws governing taxing and spending began to test ballot language earlier this year for more than a dozen different concepts to overhaul the state’s tax system, including removing a requirement for voter approval for tax hikes and a complete repeal of TABOR.

And advocates were clear that, regardless of the outcome, they would press forward. Now those details are starting to come into view.

The details remain murky, but graduated income tax is the focus

The next proposal for a ballot measure is expected in coming months to remove the state’s flat income tax — in place since 1987 — and return to a graduated tax structure in which higher-income earners pay more than low-income residents. The current rate is 4.63%.

The Bell Policy Center and Colorado Fiscal Institute even tested ideas in an October poll of likely 2020 voters. The Keating Research survey, shared exclusively with The Colorado Sun, explored whether voters would support increasing income taxes on those who make more than $300,000 and keep it the same for all below that threshold. The results found support from 57% with 39% opposed and 5% unsure.

MORE: What you need to know about TABOR, Gallagher, Amendment 23 and the hidden forces that constrain spending in Colorado

When voters are asked to think about the government services they receive, 52% felt they pay the right amount in taxes and another 35% said it’s too much — a split well outside the 4.4 percentage point margin of error. Another 8% believed taxes were too low.

“Prop CC passing would have helped, but there remain deep inequities in our constitutional tax code that make it so people who earn low incomes — (and) are more likely to be people of color — pay higher overall tax rates than the wealthy,” said Hedges at the fiscal institute.

The numbers are no sure bet, though. In August, a poll gave Prop. CC a comfortable lead, but after the campaign voters flipped their views.

Wasserman at the Bell Policy Center told The Sun that the $300,000 figure in the poll was just a test case because it represents the top 5% of income earners in Colorado.

The final language for a progressive income tax structure — who would pay more and who may pay less — remains unsettled. But whatever is decided, it will take a constitutional change to implement a new tax system and possibly repeal TABOR, which acts as a lock on the tax rate. It’s a difficult hurdle made only trickier because the poll showed that most people don’t understand TABOR and how it works.

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“I just think it’s time to question some of the conventional wisdoms,” Wasserman said in an interview. “When we play it safe it’s very easy for the other side to take advantage of it.”

The nascent idea is drawing support from major players in the wake of Prop. CC’s defeat, including the state’s teacher’s union. “Coloradans want to see bold, structural changes in tax and budget policy that benefits everyone, not just the wealthy few,” said Amie Baca-Oehlert, president of the Colorado Education Association.

One potential critic is Gov. Jared Polis. The Democrat has advocated for lowering the state’s income tax — not increasing it — much to the ire of his allies. And in releasing his budget plan last week, Polis said he would continue to push the idea, which he proposes to offset with the elimination of special interest tax breaks.

And after Prop. CC’s defeat, Polis said in a statement that results show that “voters want elected officials to do more with their existing tools and legal authority” — rather than approving new measures.

Sun correspondent Sandra Fish contributed to this report.

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