The anti-taxpayer majority on the Colorado Supreme Court soon will have another chance to stand the constitution on its head, thanks to a remarkably unambiguous ruling by the Colorado Court of Appeals.
In an opinion written by Judge Sean Connelly, a three-judge panel ruled that the Colorado Department of Revenue cannot increase the severance tax rate applied to coal mining without a public vote.
Adopted in 1977, the severance tax is paid by companies that extract minerals, oil or gas from the ground and is calculated by multiplying the quantity extracted by a statutory rate that accounted for changes in the Producers’ Price Index. Originally, the tax rate for coal was set at 36 cents per ton and had increased to 54 cents by 1992.
When Colorado voters adopted the Taxpayers Bill of Rights (TABOR), the Department of Revenue concluded that it was precluded from further increases unless it obtained voter approval.
In 2006, a state audit suggested that the Department could increase the rate and that it was obligated to do so under state law. An advisory opinion from the attorney general’s office concurred, citing a 1995 supreme court case that concluded voter approval was not necessary for statutes that existed prior to TABOR. Accordingly, the Department increased the coal tax to 76 cents per ton.
Once the rate increase was imposed, Colorado Mining Association and several of its members filed suit, claiming that when TABOR passed, such tax rate increases were barred. After all, TABOR is a constitutional amendment, therefore superior to any statute, and specifically requires voter approval for “any . . . tax rate increase.”
Denver district court judge Larry Naves sided with state government. Ironically, Judge Naves didn’t hang his hat on the pre-existing statute argument but ruled instead that increasing the tax rate from 54 cents to 76 cents was not a tax rate increase.
Fortunately, the Court of Appeals, in a refreshingly brief seven-page opinion, ruled that a tax rate increase was precisely what it appeared to be and found that “TABOR precludes increasing the coal severance tax rate without voter approval.”
The opinion, written by Connelly, a 2008 appointment by Gov. Bill Ritter, offers a wonderfully succinct conclusion:
“(1) TABOR prohibits increasing tax rates without voter approval.
“(2) Applying the statutory formula increased the coal severance tax rate without voter approval.
“(3) Therefore, TABOR was violated.”
Such a simple approach, Connelly wrote, “is appropriate because we must look to the intent of the voter as (TABOR) is an initiated constitutional provision.”
The court “must consider how the typical voter would interpret ‘tax (rate) increase,'” he continued.
Such fidelity to the law and to the voters is sure to rile the high court, which just one year ago ruled in 45 tortuous pages that the state legislature could change the way school districts calculate property taxes, thereby increasing tax revenues by $117 million in just the first year, without seeking voter approval as required by TABOR.
In that Orwellian decision, Chief Justice Mary Mullarkey wrote:
• “(L)egislation requiring local districts to provide a share of jointly funded programs does not amount to the imposition or levy of a tax on those districts by the state.” Translation: requiring a school board to raise taxes is not a tax increase.
• The state constitution should “be interpreted as a whole with effect given to every term contained therein.” But within just a few pages, she dismissed TABOR’s provision requiring voter approval of a “tax policy change directly causing a net revenue gain to any district” as an “undefined catch-all phrase” that “cannot be applied” if it has only a “de minimus impact.” She later argues that “any district” doesn’t mean any district.
• That the legislature’s decision to increase property tax revenues was not a tax increase but a “reflection,” a “recognition,” an “implementation,” a “stabilization” and a “clear statutory direction.”
When the state supreme court gets ahold of the severance tax case, rest assured that Mullarkey and her anti-taxpayer majority will explain again that “up is down,” “round is square,” “more is less” and that the plain language of the constitution doesn’t really mean what it so obviously says.