Income Tax Increase on Fall Ballot

Aug 27, 2013 | Economy, Government & Policy

In November, Colorado voters will be asked to change the state constitution to increase the state income tax. The money would be dedicated to pre-k – 12 public education. The measure is called Initiative 22. If passed, it will provide an additional $1 billion annually for public education. The tax is not sunset meaning that it would last into perpetuity.

The current state income tax rate is 4.63%. The proposed tax hike has two tiers: income under $75,000 would be taxed at 5% and income over $75,000 would be taxed at 5.9%. Proponents of the tax increases are saying that this is only a 1.3% increase. Well, no, that’s not correct. Going from 4.63% to 5.9% rate is a 27% increase. One immediate concern for me is that many people earning above $75,000 are small business owners whose business income is taxed at the personal income tax rate. If the measure passes, many small companies will see a 27% increase in their state income taxes.

I sat in a session recently in which proponents of Initiative 22 made their case for the tax increases. We all want to support the education of children, right? And we understand that good schools are important to Colorado’s economic competitiveness. Yet, as I listened that day and have thought about the issue since then, I have many unanswered questions. Hopefully they will be addressed over the next couple of months. Among them are these:

  • Colorado currently ranks 26th in the nation in expenditures per student, so why is this additional money needed? Specifically, what problems exist with public education in our state that require $1 billion more of expenditures per year?
  • For $1 billion more per year what improvements can we expect in student performance? Asked another way, a decade from now after spending $10 billion more for public education than we are today, what improvements will taxpayers see in student graduation rates, test scores and graduates’ labor market competitiveness? At a glance, Initiative 22 looks like a lot more money for the same education results. If that’s not the case, supporters need to explain that.
  • Or, is this tax increase largely about backfilling the state public employee retirement system, PERA?
  • Why is Initiative 22 being built into the state constitution?
  • Why the two-tiered income tax? Doesn’t the higher tier unfairly impact small businesses whose incomes are taxed at a personal rate? Why should they be expected to shoulder a disproportionately higher share of the cost of public education?
  • Why has higher education has been left out of this tax measure? Doesn’t a large tax increase like this actually hurt the future funding prospects of higher education?
  • How will this measure impact Poudre School District?

Sometime over the next month the Northern Colorado Legislative Alliance – the joint state legislative committee of the Fort Collins, Greeley and Loveland chambers of commerce and the economic development corporations for Larimer and Weld counties – will recommend a position to the boards of directors of its 5 partner entities. NCLA will be seeking answers to these and other questions.

If you have answers, questions or opinions on Initiative 22, contact me at [email protected] or at 970 482-3751 x 102.