COLORADO CAPITAL REPORT
Published: September 14, 2018
Initiative 93 Becomes Amendment 73
Initiative 93, the proposed ballot measure to progressively increase state income taxes by $1.6 billion to fund P-12 education, has been labeled Amendment 73 by the Colorado Secretary of State’s Office.
Amendment 73’s ballot title and submission clause, the wording that will appear on the ballot, has been set by the Ballot Title Setting Board. Because Amendment 73 would amend the Colorado Constitution, a 55 percent vote is required to pass (see below) it.
REMI Partnership Report
Progressively increasing the income tax on individuals and businesses filing via individuals’ Social Security numbers that earn more than $150,000 per year;
Increasing the income tax on corporations; and
Altering the residential and commercial property tax system.
The report makes the following points about the “promise” of Amendment 74’s earmarking of new tax revenue to P-12 education:
“There is no evidence of any performance increase in terms of graduation rates that can be determined from increased spending alone. The measure would increase education spending by a minimum of $1.1 billion. Recent spending patterns indicate these is no guarantee that new money will reach classrooms. Rising PERA costs now take over $450 million from school districts to pay down unfunded liability. Recent years ratio of new non-teacher staff to teachers has been over 3 to 1.”
The REMI report predicts a major, negative impact on the Colorado economy:
Average annual loss of 11,400 private-sector jobs annually for the next 20 years.
Annual decrease of state gross domestic product (GDP) would be $850 million.
Disposable personal income will drop by $1.8 billion yearly.
Here’s the Legislative Council’s initial analysis of the measure:
Income tax. The measure creates an exception to the current law requirement that any new income tax law change require taxable net income to be taxed at a single rate. Specifically, the measure allows multiple tax rates to apply to individuals, trusts, estates, and corporations if the tax increase is approved by voters for the funding of P-12 public education. The measure then increases state personal income tax rates on federal taxable income by the following graduated rates, beginning in tax year 2019: - 0.37 percent for income between $150,000 and $200,000; - 1.37 percent for income between $200,000 and $300,000; - 2.37 percent for income between $300,000 and $500,000; and - 3.62 percent for income above $500,000. The measure also increases the state corporate income tax rate for domestic C corporations and foreign C corporations doing business in Colorado by 1.37 percent beginning in tax year 2019. All revenue from this individual and corporate income tax increase is deposited in the Quality Public Education Fund and may be retained and spent without further voter approval.
As noted, Amendment 73 would increase the corporate income-tax rate from the current 4.63% by an additional 1.37% for C-corporations, both domestic and foreign. That’s a 30% increase in the corporate income tax rate!
In the August 9, 2013, issue of The Colorado Capitol Report, the Colorado Chamber examined which businesses file under the individual tax return:
. . . a business owner who operates as “sole proprietorship” or two or more business owners who operate as “general partnership,” “limited partnership,” “limited liability company (LLCs)” and “S Corporations” file their tax returns as individuals.
In addition, “limited liability partnerships” and “limited liability limited partnerships” will be taxed as partnerships unless they elect to be taxed as corporations. For more information on these types of businesses, read The Colorado Business Resource Guide.”
The REMI Partnership study makes the following points:
First, the proposal would increase taxes by $1.6 billion, which would include a $1.4 billion increase in personal income taxes. This would be a 20 percent increase in tax revenue.
The top marginal rate would leap from 37th to 8th among states with income taxes. This would be an 80 percent increase from the existing tax rate.
The corporate income tax rate would increase by 30 percent, which would raise Colorado from 43rd among states with a corporate income tax to 31st.
The REMI Partnership report also examines the more complicated question of what Amendment 74 would do to the state’s property tax system. The study says it would set the residential property tax rate at 7 percent, which is an increase over the projected rate of 6.1 percent. It would decrease the assessment rate for most non-residential property to 24 percent. “This likely means that districts such as water, fire and police will face much lower revenue as the assessment rate falls while the school district rate remains constant.”
New Rules for Constitutional Ballot Initiatives
This is the first election under which new rules govern citizen initiatives to amend the Colorado Constitution. A successful ballot amendment, Amendment 71, called “Raise the Bar” in 2016 sought to make it more difficult for advocates to submit ballot measures.
The amendment requires that signatures must be obtained from at least two percent of the registered voters in each of the 35 state senate districts. (This requirement was ruled unconstitutional earlier this year by a Federal court judge, but the 10th Circuit Court of Appeals decided to allow it to remain in effect while the lawsuit remains alive.)
Ballot measures that would amend the Constitution now need a 55 percent voter approval, up from a majority vote.
Legislative Council’s Bluebook Analysis
The Legislative Council’s third and final draft analysis of Amendment 74 is now available. The analysis will go into the legislature’s Bluebook. The Bluebook will be mailed to all registered voters later this month after the final version of the Bluebook passes muster with the Legislative Council.
The supporters of Amendment 73 call their effort Great Schools, Thriving Communities, which is backed by, among others, the Colorado Education Association (CEA), a Chicago-based organization called Stand for Children and the Colorado Fiscal Institute, a liberal think tank.
As of September 4th, the initiative’s campaign committee, “Great Schools Thriving Communities” (Secretary of State Office ID # 20185033710) had raised just over $447,000.
For more information, read:
“SPONSORED: New study asks, is a $1.6 billion tax increase worth it?” by Tim Brown, Colorado Politics, September 13th.
“Elections Matter: Legislative and Governor’s Races Plus Potential Critical Ballot Measures Face Business Community,” Colorado Capitol Report, August 10th.
“Education Tax Increase Proposal Takes Dead Aim at Higher-Income Taxpayers, Corporations and Non-Corporate Businesses,” Colorado Capitol Report, July 27th.