Denver’s total sales tax rate is jumping to 8.81% next year in the name of resolving homelessness and curbing climate change, voters have decided.
For weeks, ballots have flooded in against a backdrop of wildfires ravaging the state and a pandemic exacerbating the city's decades-long homelessness crisis.
As of 10 p.m. Tuesday night, 2A — a measure that would raise city sales taxes by 0.25% to clean up the city’s climate footprint — had earned about 64% of the vote. That means, as of January, the tax will begin raising roughly $36 million annually to make it happen, according to the Denver Climate Action Task Force, which made the calculation. The goal is to move the city closer to its target of achieving a 40% decrease in greenhouse gas emissions by 2025, a 60% drop by 2030 and a 100% decrease by 2040.
"It looks like Denver residents used their vote to show how much they value our climate and our future," Councilman Jolon Clark, who worked with the task force and backed the bill, wrote in a text message. "2A funds will allow us to quickly act to help protect our land, air and water while leading the way on how cities can tackle these issues head on."
Measure 2B, to raise taxes equally as much, by 2.5 cents on a $10 purchase, will funnel up to $40 million annually into homelessness relief programs. The initiative, which had garnered nearly 65% of the vote as 10 p.m. Tuesday, comes at a time when rent is rising faster than income and the city’s seemingly unending homeless crisis continues to grow.
The number of people experiencing homelessness in Denver has increased by more than a quarter since 2017, now affecting nearly 4,200 people, according to the latest Point-in-Time snapshot taken in January — months before the COVID-19 pandemic sparked soaring unemployment and hurled housing stability further into jeopardy.
Councilwoman At-Large Robin Kniech, who sponsored the bill, was not surprised by the result.
"Homelessness has been a top concern in this community for several years," she told Colorado Politics. "People were ready for solutions to say yes to.
"Perhaps the margin is stronger than I expected, if it holds through the end," she said around 10 p.m., "but the compassion and commitment to this community does not surprise me."
Now that both taxes have passed, the city will be in the upper tier of sales taxes in the region, although still not the highest. Food, water, fuel, medical supplies and feminine hygiene products are exempt from both taxes, and neither are scheduled to sunset.
Despite the exemptions, critics of the sales tax increases have taken aim at their “regressive” nature, meaning everyone, regardless of income, pays the same amount of sales taxes.
“We’re asking too much from our voters right now,” Councilman Kevin Flynn recently said, revealing that he planned to only support the homeless resolution tax. Raising revenue for climate action through a sales tax is not the “appropriate way,” he said, but rather the “easy way out.”
A recent paper by the Bell Policy Center shows that Colorado over the last three decades has increasingly relied on regressive taxes that hurt low- and middle-income families.
“The regressivity of Colorado’s tax code builds upon and exacerbates long-standing racial inequality,” the report states. “An overreliance on sales tax has a cumulative negative effect on Coloradans of color, as they are often less likely to own homes and spend more of their income on items affected by sales taxes.”
Proponents of the climate tax defend the legislation by pointing to the fact that half of what's raised each year would be dedicated to projects directly affecting marginalized and low-income communities, which have been disproportionately impacted by climate change.
The Denver GOP opposed the measure for a different reason: because it is a “substantial tax increase for unspecified programs.”
The climate action measure was approved unanimously by the Denver Climate Action Task Force, which includes representatives from Resilient Denver, Sierra Club, Denver Metro Association of Realtors, Xcel Energy, the International Indigenous Youth Council, Denver Streets Partnership and others.
The homeless sales tax increase sponsored by Kniech was met with less resistance and backed by the big dogs, including Mayor Michael Hancock, the Colorado Coalition for the Homeless and other major service providers.
The new funding will support housing, shelter and services for the city's unhoused residents and be used in the immediate term to help sustain the Department of Housing Stability's COVID-19 emergency response, which has included leasing more than 900 respite and protection action motel rooms for people with underlying health conditions or who may have contracted the virus. More than 600 people experiencing homelessness in Denver have tested positive for COVID-19. At least seven have died.
The Denver Republican Party came out against the bill on the basis that it was a “large permanent tax increase to address an issue that has already been used to extract large, permanent tax increases in the past.”
The Downtown Denver Partnership, a business advocacy organization that plays a pivotal role in shaping the heart of the city, stood behind the tax.
“We understand that there is a gap in funding some of the solutions that are needed to create meaningful change," Tami Door, the business group's president and CEO, said in a phone interview Tuesday night. "We also believe that that needs to be coupled with strong strategy, ongoing accountability for results and the willingness to continue to be innovative in new approaches that will resolve homelessness for the long term."
The Downtown Denver Partnership lobbied for the city’s 2012 ordinance that outlawed outdoor camping, known as the “camping ban.” In May 2019, the group also helped fund the successful fight against Initiative 300, the citizen-led ballot initiative that would have repealed the ban and other laws that advocates saw as criminalizing homelessness.
The city spends about $26,000 per person experiencing homelessness every year, according to a 2019 report by the Common Sense Institute, a Denver-based, business-focused think tank. The new sales tax increase would add another $10,000 a year, according to Chris Brown, CSI’s policy and research director.
These figures are why the homeless tax increase makes sense, advocates say.
"If we do not find meaningful solutions to homelessness ... the cost is greater on the economic side, because the cost of individuals that are getting services and support in an inefficient manner actually exponentially costs the taxpayers even more money," Door told Colorado Politics, "because the care that they're receiving is not in a continuum of care that leads to actual housing."