If Colorado legislators aren’t taking this year’s alleged “budget crisis” seriously, why should the rest of us?
Only a couple of weeks into the regular session, lawmakers have already introduced more than a dozen bills that would create, continue, or expand special interest tax credits or deductions.
If math is still a real thing, then introducing bills that reduce revenue will not help the legislature close its $850 million budget shortfall.
Tax expenditures reduce revenue
As I have explained before, these targeted tax breaks narrow Colorado’s tax base, distorting the state’s flat 4.4% rate, making the system less fair and more complicated.
Given two extremes, hundreds of tax loopholes and an opaque tax code on one side versus broad-based and simple taxation on the other, Coloradans continue to prefer the latter.
The state’s big $1.2 billion shortfall last year was quietly reconciled without any significant cuts to healthcare, K-12 education, and higher education (which together account for over 70 percent of the state’s General Fund).
This year, we are supposed to believe that this shortfall is the “real deal,” but ignore the fact that legislators deliberately plan to reduce their own revenue through tax expenditures.
If revenue were truly a concern, the Independence Institute has, for years, offered a solution: reduce tax expenditures to increase tax revenue.
After that, the state would ideally take it a step further and use the increased revenue to “buy down” the income tax rate, similar to what Senate Bill 228 was designed to do in 2024.
Unfortunately for Coloradans, both parties are guilty of passing tax breaks that undermine the flat tax, they just do it for different reasons.
Refuse to play the game
Colorado’s progressive legislators often support tax expenditures because they undermine broad-based refunds of over-collected tax revenue under the Taxpayer’s Bill of Rights (TABOR) and instead funnel that money to narrow interests, which can then be called upon to create an uproar anytime anyone suggests broad-based tax relief.
Colorado’s conservative legislators often support tax breaks because they are so politically neutered that they will take any short-term and well-intentioned win to help give lower taxes to their constituents.
What the conservatives do not realize is that by playing the tax expenditure game, they are handing progressives ammunition to be used in their ultimate goal of destroying TABOR.
As long as the left is in power, they would rather conservatives collect their small wins in tax breaks if it means special-interest taxation remains the name of the game, rather than broad-based tax relief.
Of course, politics is often about securing reelection rather than producing long-term solutions for Colorado’s future generations.
The whole budget “crisis” narrative is ultimately disingenuous when legislators continue actively choosing to reduce revenue through sweetheart tax deals.
