Jared Polis Warns Colorado's Progressive Tax Ballot Measure Could 'Cripple' the Economy
Voters in Colorado will decide a pair of ballot initiatives next week that could secure the state's low-tax reputation or shatter it.
Next week's election is a pivotal one for Colorado, as voters will decide a pair of ballot questions that could secure the state's low-tax, small-government reputation—or shatter it.
Confusingly, there is a slim possibility that they decide to do both. More on that in a moment.
The two competing ballot measures could hardly be more different. The first, Proposition 136, would cap individual and corporate income taxes at 4.4 percent—the state's current flat rate.
The other, Amendment 87, would rewrite the state's constitution to allow for a progressive income tax. It would also set new rates, ranging from 7.4 percent on income over $500,000 to 8.4 percent on income over $1 million. And it would offer a modest tax cut to the lower end of the income spectrum: Individuals earning less than $100,000 would pay 4.2 percent, while those earning less than $25,000 would pay 3.7 percent.
Even with those offsets, Amendment 87 would be a massive tax increase. Both advocates and opponents agree that it would generate about $2–3 billion in additional annual revenue for the state government.
For now, the higher tax rates created by Amendment 87 would only apply to incomes over $500,000. Unsurprisingly, supporters of the measure are framing this as an opportunity to make the wealthy "pay their fair share."
There are two reasons why that argument is a bit deceiving.
As Jared Walczak, a senior fellow at the Tax Foundation, points out, "the new rates would be statutory, while the authorization for a graduated-rate tax would be enshrined in the constitution, permitting the legislature to adjust rates later." Lawmakers would not have to get permission from the voters to make those changes, so Coloradans would be trading away their flat income tax for a new model where income taxes could be hiked by the legislature at any time.
Second, the new rates are not indexed to inflation. As a result, "a household making $450,000 a year in today's dollars would be moved into a higher tax bracket within eight years if their earnings increased by 3% annually," reports The Colorado Sun, which crunched the numbers. Such "bracket creep" would also push more workers over the $100,000 threshold, nullifying the small tax cut for workers making less than that.
Politically, the progressive income tax proposal is dividing Democrats. The Colorado Democratic Party has endorsed Amendment 87 (along with many of its usual allies, like the AFL-CIO and the state's largest teachers union).
But Democratic Gov. Jared Polis has called the proposal "a huge blank check to politicians" that will "cripple our economy and reduce jobs."
In comments to a Denver TV station, Polis also highlighted how higher taxes in Colorado would make the state less competitive with its neighbors. "Utah has a very similar tax rate to what we have. If ours is double, we can't compete for businesses," Polis told Denver7. "It's game over. We will not be able to attract new employers to Colorado if the voters adopt this."
It's not just Utah. If the amendment passes, Colorado would have a significantly higher top income tax rate than any of its neighbors. (The current highest in that group is New Mexico, with its top rate of 5.9 percent.)
Under Colorado law, constitutional amendments typically need 55 percent approval to pass. However, Amendment 87 requires only a simple majority* because it technically repeals provisions in the constitution, rather than adding new ones. Similarly, Proposition 136—the one that would cap the income tax rate at 4.4 percent—requires just a simple majority.
It is possible, though unlikely, that both could pass. That would create a conflict, since the state's income tax can't be capped at 4.4 percent and also hiked to more than 7 percent on incomes over $500,000.
If that happens, the ballot question with the larger share of support would win, per state law. "In short, that means Amendment 87 would need to both win majority support from voters and surpass Proposition 136 in total votes to go into effect," explains the Denver Post, which has encouraged residents to vote against both ballot measures.
Accordingly, Proposition 136 must win majority support from the voters and surpass Amendment 87 (which needs 55 percent to pass, don't forget) to be implemented.
It is all a bit confusing, but the outcomes are worth watching. Colorado has long been a bit of an outlier among "blue" states for its relatively low taxes and booming population. It's now up to the voters to decide if that remains true.
*CORRECTION: This article incorrectly described how Amendment 87 could be passed into law.