Editor’s note: This represents the opinion of The Denver Post editorial board, which is separate from the paper’s news operation. Read more endorsements here
The Denver Post editorial board – fiscally conservative and concerned about inflation, skyrocketing property taxes, and the deleterious effect of reducing this state’s general fund revenue before a pending recession — urges voters to reject three tax proposals on the ballot next month: Proposition FF, Proposition 121 and Proposition 123.
Many Colorado teachers reported seeing an improvement in student performance and a decrease in hunger when the state and the federal government stepped up to provide free lunches to every student during the most acute phases of the COVID pandemic.
This weighs heavy on us as we urge voters to reject this proposition which would raise taxes on those making more than $300,000 in taxable income to generate $100 million a year for free school lunches for every public school student in the state regardless of socioeconomic status.
Why would we oppose a measure we know will help reduce child hunger in this state? Colorado lawmakers attempted to fund free universal school lunch during the 2022 General Assembly and when that measure failed — in large part because of the large fiscal note — lawmakers instead sent Proposition FF to voters to see if they would approve a dedicated revenue stream specifically for lunches.
The mechanism for the new tax is flawed.
Colorado’s income tax is based on federal adjusted gross income. Once you calculate the AGI for federal taxes, that number is carried over to state tax forms. Colorado taxes are calculated based on AGI minus state-specific deductions and tax credits and adding back in any non-allowable federal deductions.
The bill would limit the total income deductions — whether the federal or state (not including tax credits) — for anyone with an AGI of more than $300,000 to $16,000. Because the typical federal standard deduction is almost $26,000, this is a significant bump in taxes, even for those who do not itemize for big tax breaks.
And this is not a tax on only the most wealthy Coloradans but also will hit many upper-middle-class households working two full-time jobs, and we think increasing taxes, even on these well-off households during high-inflation and a looming recession, is a bad decision for this state.
While we are opposing two proposed tax increases (of sorts) on the November ballot, we are also vehemently opposed to lowering the state income tax rate across the board.
This foolish proposal would cut state revenues by $412.6 million. A loss of almost half a billion dollars would be felt by schools, state universities, and community colleges, state patrol and the bureau of investigators, prisons, juvenile detention facilities, the Department of Transportation, and even our child welfare system.
Make no mistake; Colorado’s state government is already lean and mean. There may be some administrative bloat, but the Taxpayer’s Bill of Rights has ensured that our state-wide tax rate has remained low and that any state growth in tax base cannot be out of line with the actual growth of the state. Additionally, the revenue growth is capped by a formula that is based on inflation and population growth. This means that Colorado’s state budget has not seen the exponential growth of other states.
For example, this year, Colorado taxpayers each received $750 ($1,500 for married filing jointly) in TABOR refunds, which equated to a $3.5 billion reduction in our budget. That money could have been spent on our schools, our roads, state law enforcement, or, yes, free school lunches and affordable housing programs.
There is no need for Colorado voters to reduce the income tax rate because TABOR does it automatically for them.
Furthermore, the “no” on Proposition 121 campaign has hit the nail on the head with advertisements showing pretend millionaires gloating about how much money they will save with this permanent reduction from 4.55% to 4.4%, while Coloradans with median income levels or lower, will likely receive less than $100.
There is no upside – other than relatively small tax savings — for the vast majority of Coloradans to further cut state revenue and state services at a time when we need our government to be providing essential services.
This proposal would take a small percentage of TABOR refunds beginning in the budget year 2022-23 and dedicate that money to six programs aimed at increasing the amount of affordable housing in this state.
It’s estimated the program would reduce TABOR refunds by $290 million in the budget year 2023-24, and send that money to the state Office of Economic Development and International Trade and the Colorado Department of Local Affairs to be distributed among the new programs.
The money would go to a variety of efforts to slow the affordable housing crisis this state is currently experiencing, and most of the for-sale units would be permanently reserved (under an easement) for families making about 60% or less of an area’s median income. In Denver, for a family of four, the income threshold to qualify for a house would be $70,320. Rental units constructed with the help of these state dollars would be limited to a monthly rental price of 30% of household income.
We heard from Grand Junction Mayor Anna Stout about what a difference this would make in her community, a city that has struggled to find the resources to invest in affordable housing even as the market has skyrocketed, leaving many in the community unable to buy and struggling to rent.
Just like school lunches, we want to support this program, but the state has a finite tax base and has struggled to convince voters in the past to invest in even the most core services.
We fear these external measures will siphon off the tax base and make voters unwilling to approve measures – whether it’s a tax increase or a reduction in TABOR refunds – in the future that will boost our general fund and float all essential services in this state.
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