February 13, 2023 10:56 AM UTC

GOP Glee Over IRS TABOR Snafu Says a Mouthful

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• by: Colorado Pols

As Colorado Newsline’s Lindsey Toomer reports, uncertainty thrown into the already fraught annual affair that is tax season in the United States by the Internal Revenue Service’s indecision on how to treat special tax refunds and economic stimulus payments made by nearly 20 states in 2022 was relieved Friday night, with the announcement that the IRS will not treat those payments as taxable income:

On Feb. 3, the IRS encouraged taxpayers who were uncertain about their state refunds to hold off on filing their taxes until the agency released additional guidance. Colorado’s TABOR refunds totaling $750 for single filers and $1,500 for joint filers were among 19 state refunds called into question.

“The IRS has determined that in the interest of sound tax administration and other factors, taxpayers in many states will not need to report these payments on their 2022 tax returns,” the IRS said in a statement.

Colorado’s full bipartisan federal delegation as well as Gov. Jared Polis wrote to IRS Commissioner Douglas O’Donnell asking the agency to treat the refunds as nontaxable income.

“We, like millions of Coloradans, are breathing a sigh of relief that the IRS and federal government have stepped away from taxing our refunds this year,” Polis said in a news release. “This ultimately is the best outcome for families and individuals and we will continue seeking out more ways to save people money. I will continue fighting to maintain this precedent that refunds under TABOR should never be taxed.”

Although Colorado is the only state with a constitutional refund mechanism for so-called “excess” revenue over the arbitrary limit set by the 1992 TABOR initiative, the state was far from alone in distributing revenue directly to taxpayers as part of a variety of temporary economic relief measures. The IRS’s scrutiny of last year’s Colorado Cashback program, which resulted in the jarring announcement last week that Coloradans should hold off on filing our tax returns, produced a similar moment of panic in other affected states.

But if you were a Colorado Republican, this debacle was solely the fault of–you guessed it–Gov. Jared Polis:

It’s a tactic we’ve seen more times than we can count, a good example being the absurd attempt to blame Gov. Polis for the global crash in oil production that accompanied the 2020 COVID-19 pandemic after the passage of state-level drilling reforms–or that Colorado’s new “red flag” law would have resulted in outlandish “unintended consequences” despite having been successfully implemented in other states. The IRS did not single out Colorado for this admittedly ill-timed second-guessing, and as a TABOR tax refund mechanism, last year’s Colorado Cashback checks were if anything more clearly not taxable than economic relief checks distributed by some other states.

It was a relief to see Colorado’s entire congressional delegation clap back in unison when the IRS asked taxpayers in all of the affected states to delay filing their tax returns. That stands in stark contrast to less responsible local Republicans (see above) with their pre-existing axes to grind who can’t help but try to exploit the confusion created by the IRS’s actions for political gain. The only change in last year’s reformulated Colorado Cashback refunds was to make them equal, which had the effect of boosting substantially the amount distributed to lower-income households. Despite a furious campaign from Republicans to badmouth Democrats’ rejiggering of TABOR to help lower-income Coloradans, based on the results of last year’s elections we can conclude with certainty that voters liked it just fine.

As a general rule, it’s risky politics to be gleeful about other people’s pain, especially regarding something as important as timely filing of tax returns. Last week’s surprise announcement by the IRS caused unnecessary chaos for thousands of Colorado households who had already or were about to file their returns. By pretending Colorado was somehow unique in this uncertainty, and by hammering away with off-base political attacks instead of showing some sympathy for affected Colorado taxpayers, too many local Republicans showed again that in their estimation, political leverage is worth seeing people suffer.

If you ever find yourself on that side of the debate, it’s the wrong side.