The Taxpayer Bill of Rights

Perhaps the most significant tax legislation
in the history of tax administration

The Taxpayer’s Bill of Rights is the most pro-taxpayer provision ever adopted into the Internal Revenue Code. It is substantial piece of legislation that cuts to the nitty- gritty of IRS abuses. For far too long IRS’s seizure power has gone unchecked. While this bill will not stop all cases of abusive actions, it certainly creates a whole new relationship between taxpayers and the IRS, provided of course, that IRS employees abide by the letter and spirit of the law.

Almost 20 years in the making, the Taxpayer Bill of Rights is now codified into the Internal Revenue Code. A result of numerous complaints to Congress of abusive behavior by IRS Agents, it is also the product of hard work, and courageous effort by numerous people and organizations. This section is here not only to help you understand what legislative rights and protections are available to you, but also to demonstrate how YOU can make a difference in changing things for the better. To this end, we are including the history of the Taxpayer Bill of Rights, so you can see the evolution from idea stage to Congressional passage. You’ll also be able to see who the players were, what partnerships were formed, and who contributed and who didn’t contribute to the process. Truly an interesting study in grass roots politics!

Click on the red links to read more.

Hearings All hearings on the Taxpayer Bill of Rights from 1981-1998.
Tax Payer Bill of Rights #1 The 1988 Taxpayer Bill of Rights.Taxpayer Bill of Rights Passed
Taxpayer Bill of Rights #2 The 1996 Taxpayer Bill of Rights.
Taxpayer Bill of Rights #3 Summary of Title III: Taxpayer Protection and Rights. From H.R. 2676, The Internal Revenue Service Restructuring and Reform Act of 1998.PDF – Version
(PDF) Title III: Taxpayer Protection and Rights.  From H.R. 2676.

Policy Basics: Taxpayer Bill of Rights (TABOR)

PDF of this Policy Basics (3pp.)

Updated February 15, 2013

Related Areas of Research

A Taxpayer Bill of Rights or TABOR is a constitutional measure that limits the annual growth in state and local revenues to the sum of the inflation rate and the percentage change in the state’s population. (For example, if the general inflation rate is 2 percent and the state’s population grows by 1 percent, state revenue available for expenditures can increase by 3 percent.  The balance must be refunded to taxpayers.)  Overriding these limits requires voters’ approval.

Colorado enacted the nation’s only TABOR in 1992 but suspended it for five years in 2005 in response to a sharp decline in public services.  Though anti-government groups have promoted TABOR proposals in at least 30 states since 2004, no other states have adopted it.

TABOR’s “Population-Plus-Inflation” Formula

Proponents argue that TABOR’s population-plus-inflation formula allows states to maintain public services while keeping spending under control.  In reality, however, the formula does not keep pace with the normal growth in the cost of maintaining services, let alone the need to make new investments or improvements.  Inevitably, TABOR forces large, annual cuts to services that families and businesses rely on and that support state economic prosperity, as Colorado’s experience shows.

Here’s why the population-plus-inflation formula doesn’t work:

  • Population.  The segments of the population requiring the most state services, such as senior citizens and children, often expand more rapidly than the population as a whole.  In Florida, for example (which recently defeated a TABOR measure), the total population is projected to grow by 27 percent from 2010 to 2030, while the 65-and-older population is projected to grow three times as fast, by 87 percent.
  • Inflation.  The inflation measure that TABOR proposals use — the U.S. Bureau of Labor’s “Consumer Price Index-All Urban Consumers” (CPI-U) — is not an accurate measure of the cost of providing state services.  It gauges changes in the cost of goods and services that individual consumers buy, like housing,
  • transportation, and food, rather than the services that state governments pay for, like education and health care.  The cost of providing public services grows much faster than the general rate of inflation for consumer goods, in part because public services are less likely to reap the efficiency and productivity gains achieved by other sectors of the economy.  For example, teachers can only teach so many students, and nurses can only care for so many patients.

Under a TABOR, therefore, a state can maintain health and other services for the elderly (or expand them to meet growing need) only by cutting other areas of the budget, such as education.

TABOR’s Impact on Colorado

Colorado’s national rankings on a number of public services plummeted under TABOR.  For example:

  • Colorado fell from 35th to 49th in the nation in K-12 spending as a percentage of personal income.
  • College and university funding as a share of personal income declined from 35th in the nation to 48th.
  • Colorado fell to near the bottom of national rankings in providing children with full, on-time vaccinations.
  • The share of low-income children in the state who lacked health insurance doubled, making Colorado the worst in the nation by this measure.

In addition, TABOR failed to improve Colorado’s business climate or economy, contrary to the predictions of its supporters.  Instead it contributed to a credit rating downgrade and alarmed business leaders by undermining the state’s ability to invest in its basic infrastructure and workforce.









Tom Clark, Executive Vice President of the Denver Metro Chamber of Commerce, stated, “For businesses to be successful, you need roads and you need higher education, both of which have gotten worse under TABOR and will continue to get worse.”  Similarly, Gail Klapper, director of the Colorado Forum (an organization of 60 of the state’s leading CEOs), said, “The business community has said this is not good for business, and this is not good for Colorado.”

In 2005, Colorado voters approved a measure to suspend TABOR’s formula for five years in order to allow the state to rebuild its public services.  Unfortunately, the suspension did not last long enough for the state to recover fully from the period that TABOR was in effect, and the recent recession further undermined that effort.

In five states — Florida, Maine, Nebraska, Oregon, and Washington — these proposals reached the ballot but were rejected by voters. Colorado thus remains the only state with a TABOR.