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Opinion: How do we fix Colorado’s unfair tax system? It depends on who pays.

I know you’re tired of hearing about Colorado’s public funding needs, but as they continue to fester, we don’t have the luxury of ignoring them. No amount of arguing fiscal statistics ad nauseam (which we’ve done for years) changes the bottom line: In real dollars, adjusted for population, our state spends little more than it did in 2008, well below what’s needed to meet the costs of today. It’s an undeniable reality that shows up in our schools, our roads, and our family budgets. We can’t not talk about this, because it’s not good enough for a place like Colorado. The way we talk about it, however, does need to change. 

Scott Wasserman

It’s likely most Coloradans don’t know about an explicit prohibition in our “Taxpayer Bill of Rights” that requires a flat tax. Because of it, there aren’t different tax rates for different income levels — everyone, no matter their income level, pays 4.63%. 

That’s why our fiscal conversation has been a crude one for too long. We’ve been arguing about public funding and taxes for decades in Colorado, but our arguments have been too binary: Raise taxes or don’t. Either everyone’s taxes go up or nobody’s do. TABOR’s constitutional insistence on a flat tax has made it nearly impossible to expand the conversation beyond these two options. 

READ: Colorado Sun opinion columnists.

While many other states talk about raising taxes at the top and lowering them at the bottom, this type of necessary nuance has been absent in most of Colorado’s tax policy conversations. Instead, we’re relegated to our standard corners — conservatives tell the government to keep its hands out of our pockets, liberals call for more resources to fund more services for more Coloradans. 

Unable to address the inequality in our tax system, we’re similarly unable to close equity gaps in our state. The next step forward must be to talk about a fair tax code.

A flat income tax might seem fair on paper, but it leads to real unfairness when you look at it more closely. That’s because the income tax is just one part of our fiscal picture. We pay other taxes in the form of sales taxes on goods we buy and property taxes on our homes. According to the Institute for Taxation and Economic Policy, Colorado families making less than $113,000 per year are paying north of 8% of their income to the state, while families making $250,000 and above are paying less than 7%.

The inequity doesn’t just show up in terms of what we pay; it shows up in what we get back. Yes, our economy is hot right now, but our everyday expenses are spiraling out of control. It’s not just housing and health care. It’s the cost of child care, college, and an array of other public sector services that we depend on yet underfund. This means those bearing the biggest tax burden are paying the steepest prices to afford life here.

Some people do well in this scenario. Most do not. There’s no getting around the fact that predominantly white newcomers are in that first category while an awful lot of Coloradans of color aren’t. We can’t ignore the vast economic differences between the Front Range and our rural communities. These and other imbalances across our state will catch up with us, and soon. 

Many of our state’s financial challenges could be fixed by modestly raising taxes on the 5% of Colorado households earning more than $250,000 per year. Not only would this allow us to cut taxes for everyone else (yes, 95% of Coloradans), but such a change could net enough money for our state to adequately invest in schools, roads, and health care. 

We don’t need to burden already-struggling families with higher tax rates when we can ask for modest, new contributions from those doing better than the vast majority of Coloradans. When we don’t widen our scope of solutions, we endanger what we have going for us by continuing to ignore the equity gaps that are popping up across the Colorado landscape. 

Whether you support a progressive income tax, a change in our sales tax system, or some other adjustment to our tax policy, don’t shy away from a bolder conversation about what could be. We need to change the broken, outdated, and upside-down rules that govern public spending in Colorado. Those rules lead to bad outcomes that only we, not our elected officials, can turn around.

We can debate how much is too much. We can debate ways to be more targeted and precise. We can debate who needs a break and who has enough. There are plenty of ways to have this conversation beyond the crude way we have in the past, but we must be ready to rectify the injustices in our tax system with reasonable alterations to the way we’ve always done things. Anything else is unsustainable.


Scott Wasserman is the president of the Bell Policy Center in Denver.

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