Two proposed state amendments are harmful to small businesses and the state economy: Amendments 69 and 70.
Amendment 69 would create a huge new government entity to run a health care financing system in Colorado called ColoradoCare. It would have a budget larger than the current state budget. In fact, it will be larger than corporate giants like American Express, Nike and McDonald’s.
The money to run this behemoth would come from one of the largest state income taxes in the nation. All income in the state would be subject to the new 10 percent tax.
The income tax on payroll would be split with 6.7 percent paid by employers (businesses, nonprofits, education and government) and 3.3 percent paid by their employees.
The rub for most small businesses and independent contractors, however, is that they get to pay the entire 10 percent. That’s because tax law treats their company income as personal income. These farmers and small businesses would have an effective state tax rate of 14.63 percent, the highest in the nation, perhaps providing an incentive for some businesses to relocate to friendlier climes.
But it’s not just employers. Citizens earning non-payroll income will pay a 10 percent tax on rental income, taxable pensions, taxable Social Security, taxable interest, dividends, taxable refunds and credits, capital gains, taxable IRA distributions and other income.
This massive taxpayer obligation would be embedded into the state’s constitution, making changes difficult. Oh, and the whole thing would be run by a small group of politicians with broad taxing authority. If the inefficiencies of this government-run monopoly drive up health care costs, they will be forced to raise taxes and /or cut benefits.
Amendment 70 would raise the state minimum wage to $12 per hour by January 2020 with the stated aim of helping people make a livable wage.
It’s a laudable sentiment with adverse consequences. What about the person who doesn’t get a job because they have so little experience that an employer can’t justify paying that wage? After all, the employer is not required to hire an inexperienced or unskilled person. Instead, employers may ask current employees to take on more hours, or they may outsource or automate the work.
In effect, the minimum wage for the person who didn’t get hired is $0.
And while the increase probably won’t compel employers to run through the shop handing out pinks slips — though in 2014 the Congressional Budget Office estimated that raising the federal minimum wage to $10.10 would eliminate 500,000 jobs — pushing up the minimum wage does suppress job growth. Jobs not created mean fewer opportunities for unskilled workers.
Then there is the matter of political “solutions” being imposed on employers. They know how to run their organizations and pay what they must to get the work done. Amendment 70 would substitute a one-size-fits-all government fiat for their own good judgment.
Good intentions don’t always make good policy. Amendments 69 and 70 are bad for Colorado’s citizens, small businesses and economy.
Originally posted in the Fort Collins Coloradoan here: http://www.coloradoan.com/story/money/2016/10/14/david-may-column/92015326/ on October 13, 2016