The beauty of Proposition 116 on this fall's statewide ballot lies in its simplicity: It will decrease taxes for all Colorado taxpayers. Period.
That’s why shortly after the measure got approval for the November ballot, Gov. Jared Polis praised the idea of a tax cut, saying, “We’ve long sought an income tax decrease (and) particularly in this challenging time, I think Coloradans certainly need tax relief.”
He’s right, and there are countless reasons why now is the time for a modest 0.08% cut in the state’s income tax rate, though opponents may entice you to think otherwise. The only downside to the measure is that it won’t even come close to offsetting all the new taxes Coloradans are paying without having consented.
For starters, the 2017 Trump cut to federal taxes caused state taxes to increase, which Colorado voters did not approve. This happened because changes to federal tax law in 2017 affected the way Colorado calculates your state tax liability. In fiscal year 2021-22 the state will collect nearly four times more revenue from the Trump tax windfall than it would lose from the proposed tax cut in Proposition 116, according to the latest available estimates.
To offset this increase, the state legislature would need to lower state tax rates. State Sen. Jerry Sonnenberg of Sterling introduced legislation to do this, but the bill never made it through the legislature. Proposition 116 gives voters the chance to recover a small portion of the additional state taxes taken from them without their say.
Enter COVID-19. Now more than ever, Coloradans need a lifeline. Rather than providing real relief to struggling families and businesses, however, the state legislature simply handed out federal CARES Act dollars and then patted themselves on the back. In fact, one bill, HB 1420, actually robbed struggling businesses of several tax relief provisions granted under CARES. Simply put, Proposition 116 gives voters the power to provide themselves the relief that the General Assembly refused to deliver.
Of course, opponents will say that a tax cut would be irresponsible given the state’s budget shortfall. Nonsense. In this legislative session, from two bills alone, the legislature created over $450 million in new state revenues without voter approval. According to the legislature’s own analysis, that’s $100 million more than the cost of the proposed tax cut.
In addition, outside analysis by the non-partisan Common Sense Institute estimates that the tax cut would grow the state economy by about $200 million if adopted. Instead of causing a budget crisis, a vote for Proposition 116 will create new jobs and economic opportunity while helping to offset some of the new taxes the legislature does not let you vote on.
In spite of the tax cut's support from Gov. Polis, some may try to convince you that this is just a tax cut for the rich. Their evidence is that we can’t cut taxes for people who pay no taxes — generally lower-income earners — therefore we shouldn’t lower taxes for anyone.
Their message is that if you’re a working-class Coloradan who pays taxes, then you’re “the rich” and don’t deserve a tax cut. Or alternatively, you should vote against a tax cut for yourself because someone who pays more in taxes will save even more money from the cut.
The simple truth is, this is a mild but much-needed tax cut for all taxpayers.
Gov. Polis gets that, but many politicians believe they should be able to dip into your pockets without your permission because they know how to spend your money better than you.
I suspect Coloradans will have a different take come Nov. 3.
Ben Murrey serves as Independence Institute’s director of the Fiscal Policy Center, working to promote fiscal policy in the state of Colorado centered around the principles of limited government, the free market and the liberty of individuals and families to choose where their money goes.