By Jon Caldara
Political predictions are fun. So, here’s one for you — Amendment 73, the progressive income tax increase for education, will crash and burn before election day.
Okay, that’s not really a big prediction given that voters historically shoot down these types of statewide money grabs. But, what will be different is this time governments around the state, but not school districts, may be the ones who euthanize the tax hike.
Sure, we greedy, child-loathing, don’t-care-if-kids-learn-to-read types, well, we’ll be voting against it anyway. Amendment 73 will take away our popular state flat income tax rate and transform it into five tax brackets, making our gender-reassignment surgery into becoming California near complete.
The top marginal rate would skyrocket to 8.25 percent, the 9th highest in the nation. This will tempt Colorado’s most successful people and companies to relocate out of state. We see this tax-flight happening across the nation now.
According to economists Art Laffer and Steve Moore, since 2007 Texas and Florida, with no income tax, have gained 1.4 million and 850,000 residents, respectively, from other states. High income tax states California and New York have jointly lost more than 2.2 million residents.
Don’t tell me you haven’t noticed all the California license plates clogging our roads. You think it’s just the pretty mountains and legal weed that attracts them? There’s mountains and legal weed there too.
And if you think you don’t need to worry about a progressive income tax because you don’t make $150,000 a year, the first of the new higher tax brackets, well, congrats on your raise. We’ll all be in the higher brackets soon enough since Amendment 73 doesn’t index its tax brackets to inflation.
Those of us old enough remember “bracket creep.” As inflation bumped up a family’s income, but not their buying power, they got pushed into a higher tax bracket. They got taxed more but didn’t actually earn more. Government profited from inflation.
The feds ended this thievery in 1981. Ever since federal tax brackets have changed with inflation. Amendment 73 is a time-traveling DeLorean that brings Colorado taxpayers back to the eighties, when we all get pushed into higher brackets. Hello McFly.
But here’s something different — many of the virtuous, do-it-for-the-children, selfless-with-other-people’s-money types might hate 73 too. Cities, counties, fire districts, water districts, library districts and all the like might become the surprise coalition that kills Amendment 73.
Larimer County Assessor Steve Miller is among the first to send up the signal flares that 73’s change to property taxes (yes, 73 also monkeys around with property taxes) could lead to less cash for any district, other than a school district, that gets property tax money.
Colorado’s Gallagher Amendment puts 55 percent of the property tax burden on non-residential properties, and 45 percent on residential. This gives us the illusion that our home property taxes are low. Of course, Gallagher just hides the cost. We pay for business’ higher property taxes every time we purchase their goods and services.
Property taxes are based on assessment rates. There’s one higher, stagnate rate for non-residential property, and another for residential property which floats to keep the 55-45 Gallagher ratio working.
Amendment 73 sets up a new, separate property tax system by forcing new assessment rates for school districts only, but not for any of the other districts.
So, from two assessment rates under the current confusing-enough system, we’d go to a bewildering four separate rates.
Every piece of property in Colorado would get two different rates. Non-residential properties would be assessed at both 29 percent (the current rate) and at 24 percent (the new rate for school districts only). Residential properties would be assessed at a new fixed 7 percent (for schools only) and also at whatever the adjustable Gallagher rate is calculated to be, which is slated to go down soon, costing districts a lot of dough.
I know this is all wonky. But you don’t need to understand any of it to find out if Miller has a point. Just watch what all those non-school districts do in the coming weeks.
If Amendment 73 does mean less funding for them while school districts get fat, we’ll see Colorado Counties Inc, and the Colorado Municipal League, and all the other associations of Colorado’s thousands of governments start to erupt with in-fighting. More money for schools means less money for them.
Ever see Alfred Hitchcock’s classic 1944 movie “Lifeboat”?
Jon Caldara, is president of the Independence Institute, a free market think tank in Denver.