A newly proposed ballot measure depends on budget hysteria to try to change Colorado’s flat income tax into a progressive tax.
The ballot measure’s supporters are purposefully obscuring the state’s fiscal reality and catastrophizing to go after the Taxpayer’s Bill of Rights (TABOR), which progressives despise because it places modest limits on the growth of government.
They support their argument with two claims: first, that TABOR forces Colorado into a state of needless austerity, and second, that a progressive tax will make Colorado’s tax code fairer by forcing wealthy Coloradans to pay their “fair share”.
TABOR just forces responsibility
Per Britannica, austerity is defined as a set of policies, usually consisting of tax increases and spending cuts, used by governments to reduce budget deficits.
But if TABOR were forcing austerity measures, then surely the legislature would have been forced to make drastic cuts in the recent special session due to a self-inflicted budget gap.
Yet, even in a year with so much supposed fiscal turmoil, the state budget actually grew by almost 4 percent.
Additionally, when the tax rate has been reduced in the last several years, it has been at the behest of voters, not due to TABOR.
In other words, TABOR does not force austerity, but it does force politicians to practice a little fiscal responsibility and prioritize their spending. Little wonder then that they hate it so.
Tax cuts or a cash grab?
Progressives are loudly proclaiming that a progressive income tax is fairer because most Coloradans pay less, while the wealthy would pay more. Let’s examine that.
The newly proposed income tax would reduce taxes by a paltry 0.1% for those making between $100,000 and $500,000, with a paltry cut of 0.2% for those making less than $100,000.
However, as per current law, the tax rate could already be lowered by as much as 0.15% should a large enough TABOR surplus exist, and that would be for every Colorado taxpayer.
But that’s not all. Research conducted by Independence Institute suggests that revenue lost from an exorbitant number of tax expenditures — tax credits, deductions, and subsidies — passed by the legislature in the last several years could have been used to lower the income tax rate for all Coloradans by over one percent, while remaining revenue neutral.
Instead, under the proposed ballot measure, anyone earning above $500,000 would see massive increases in their tax rates, as much as 9.2% for the very highest income earners.
However, as has already been explained by Christopher Song, taxpayers who earn more than $200,000 (about 8.4% of households) already pay approximately 48% of the state’s income taxes.
Is it really “fair” to make those already carrying so much of the state’s tax burden pay even more, especially when lawmakers could easily have implemented more broad-based tax relief but chose not to?
Colorado’s regressive tax code
Ironically enough, the state’s flat income tax is already the most progressive tax that Coloradans pay.
As Song’s article also explains, Colorado’s state and local tax structure outside of the income tax is highly regressive, meaning that lower-income households tend to pay a larger share of their incomes to things like property and sales taxes than do higher earners.
Unfortunately, those arguing against the regressivity of the overall tax code mistakenly conclude that the state’s flat income tax is also regressive.
In fact, for poorer Coloradans, the flat income tax is one of the least burdensome taxes relative to other, regressive ones.
To illustrate my point, the state government could eliminate the state income tax for Colorado’s lowest earners (those making less than $15,000), and the remaining tax burden they pay as a percentage of their incomes would remain at 26.7%.
In other words, voting for wealthier Coloradans to pay more simply because one has less will do virtually nothing to alleviate lower-income Coloradans’ disproportionately high tax burden.
