If the fight over Colorado tax policy were a sporting event, half the stadium might have emptied out by now.
With the November defeat of Proposition CC, the score has become so lopsided in favor of fiscal conservatives, the outcome of any given skirmish over the Taxpayer’s Bill of Rights is starting to feel like a foregone conclusion.
But to Democrats and aligned interest groups, the losing streak at the ballot box when it comes to tax hikes for schools, roads and higher education just means they haven’t found the right game plan.
“What I took away from Prop. CC was that was not the solution,” says Carol Hedges of the Colorado Fiscal Institute, a liberal tax policy group. “That solution didn’t address the concerns of the folks who voted in that election, and we have an obligation to solve these problems.”
So barely a month after voters defeated the measure to eliminate the state’s spending cap, Hedges’ organization is back on the offensive, introducing an eye-popping 35 new tax-related ballot initiatives for 2020. The specifics vary from proposal to proposal, but a single theme unites them: creating what the left views as a more equitable tax code that requires the wealthy to pay more to fund public services.
Some of the preliminary ballot measures filed with the legislative council would do so through a progressive or graduated income tax, which imposes escalating tax rates on those with higher incomes. The system would work like federal tax brackets and how Colorado operated from 1937 through 1986 before the state moved to a flat tax.
Several other measures would impose an alternative minimum tax on corporations, designed to stop businesses from being able to claim so many tax breaks that they owe nothing in state taxes. Still others would relax TABOR’s election requirements to allow lawmakers to raise taxes without voter approval under certain circumstances.
Ultimately, voters would probably see no more than one or two of the ideas on an actual ballot. And with buy-in needed from other advocacy groups, the final concept may be something that hasn’t been even introduced yet. In the coming months, Hedges and her political allies will have to decide what represents their best chance of success with the 2020 electorate. The first step is a Dec. 30 hearing, where it will need to meet certain legal criteria to remain eligible for the statewide ballot.
“They’re all coming from the place of recognizing that our tax code, our tax system is really broken and needs to be rebuilt,” Hedges said.
But fiscal conservatives, riding high off their latest victory, have a simple response. “Three words,” said Jon Caldara, president of the Independence Institute, a think tank that advocates for low taxes. “Bring it on.”
An ongoing effort on multiple tax fronts
This isn’t the first time the fiscal institute has opted for a scattershot approach to the initiative process. Last year, Hedges’ group proposed 18 different ideas at one time to rewrite TABOR and two other constitutional fiscal provisions. The goal of the first round of mass filings: to figure out what they could legally get onto the ballot under Colorado’s single subject rule, which requires that legislation and ballot measures must fit under the umbrella of a single topic.
Many were denied the right to appear on the ballot by the Title Board, a regulatory board that enforces state elections law. A few were OK’d, but then withdrawn. The biggest one — an all-out repeal of TABOR — was given the go-ahead with a Colorado Supreme Court ruling in June but is still pending additional action.
But while last year’s initiative barrage focused on probing the legal limits of the title-setting process, this year’s theme is more about putting concrete solutions before stakeholders and the public.
“These 35,” Hedges said, before pausing to laugh at the “crazy” number, “represent various options that we think can get titled under single subject.”
A “fair and just tax system” is goal
The fiscal proposals consist of a few major policy ideas that are mixed and matched into 35 different arrangements.
The most common option is a paragraph that would declare that Colorado “taxpayers are entitled to a fair and just tax system.” It sets a goal that everyone should pay similar percentages of their income in total taxes, a response to a tax code that has become increasingly regressive in recent years. In other words, the more money you make in Colorado, the less you pay in taxes as a share of your total income.
In 2015, the last year data was available, the lowest income group paid 17% of their income in combined state and local taxes, according to Colorado’s tax profile report. The wealthiest income group paid just 7% of their income, on average — the least of any income bracket. On the other hand, higher earners still tend to pay higher tax bills overall because they make and spend more money.
There are two main factors that make Colorado’s tax code regressive. Sales taxes tend to fall more heavily on lower income groups, who spend a greater share of their disposable income on goods than those who are better off financially. Most other states offset this burden somewhat by charging wealthier people higher income tax rates, but Colorado charges a flat rate of 4.63 percent, regardless of household income.
“The Warren Buffett thing — (a billionaire who says he is) paying lower taxes than his secretary — doesn’t make any sense,” Hedges said.
One proposal would insert the “fair and just” language into the state constitution and leave it to lawmakers to decide how to achieve it. That could theoretically lead to higher taxes on the rich, or it could be accomplished by lawmakers cutting taxes at lower income levels, perhaps through targeted tax breaks for households that make less than a certain amount.
Most of the proposals, though, would require the General Assembly to either come up with graduated income tax brackets of their own, or adopt one as prescribed by the ballot measure. The brackets proposed in the preliminary initiatives would raise taxes on joint filers making more than $250,000 or individuals making more than $187,500. They would also install a top tax rate of 9.85% on any taxable income above $1 million.
Much like federal income tax brackets, moving into a higher income bracket doesn’t mean you pay a higher tax rate on all of your income, just on the income greater than each threshold. So if you’re in the proposed $250,000 to $500,000 bracket, you would pay 4.63% on the first $250,000 and then 7.25% on the income above that amount.
Another plan put forward for consideration would create an alternative minimum tax in Colorado, requiring corporations to pay at least some taxes, even if they can otherwise reduce their bill to zero through various tax breaks. Notably, the federal AMT was eliminated under President Donald Trump’s 2017 tax package, and only five states still collect a corporate AMT, according to the right-leaning Tax Foundation.
Finally, a handful of the proposals would target one of TABOR’s core provisions: voter approval of new taxes. One proposal would create exceptions that allow lawmakers to raise taxes on the wealthiest 10% of Coloradans without a public vote. Another would allow state and local officials to raise taxes without seeking permission in a year that tax collections fall by 10% from the prior year’s spending.
An uphill climb for a ballot question
Whichever initiative the organization and its allies moves forward with – whether it’s one of the 35, or a different one – their political chances likely rest on two things. To win, supporters need a 2020 electorate that looks more liberal than the low-turnout 2019 election. And they need their message about an unfair tax code that benefits the rich to break through the partisan din of a presidential election year and overcome Colorado’s aversion to increasing taxes.
National and state polling suggests higher taxes on the rich are popular. But statewide tax hikes in Colorado have long proved to be a hard sell. And some of the Colorado Fiscal Institute’s proposals would require adding new language to the state constitution, a feat that requires a supermajority vote of 55% in Colorado. (However, deleting language, such as the TABOR prohibition on graduated tax rates, can be done with a simple majority.)
Based on her experience with public opinion research, Hedges thinks virtually “everybody believes and understands that our tax system isn’t fair.” The problem for the political left is, “the reason they think it isn’t fair varies dramatically depending on who they are.”
And to conservatives, the 35 latest proposals aren’t fundamentally different from the failed tax hikes and TABOR changes that have been tried before.
“The people have soundly rejected this over and over again,” said Caldara, adding that the proponents are effectively trying to make the case that “they’ve misread the electorate all these times in the past, but this time they got it right.
“Wishing it don’t make it so,” he said.
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