By Gazette Editorial Board
Bad ideas don’t get much nuttier than Colorado’s proposed Amendment 73. It would raise taxes by $1.6 billion, purportedly soaking the rich to pay for education.
Meanwhile, it would reduce funding for counties, cities and towns, library and water districts, health agencies, fire departments and more.
Amendment 73 would defund local services just as we need better roads and bridges. It would reduce revenues for fire districts as wildfires pose increasing devastation. It would financially stress public health agencies dealing with increasing suicide rates, aging populations and an opioid crisis.
The ballot doesn’t tell voters the full story what this amendment would do. It comes across as higher taxes for the rich, lower taxes for all else, and more money for schools. What’s not to like?
Colorado has long benefited from a flat income tax in which everyone pays 4.63 percent. This means the state imposes no disincentive to success. By raising income taxes on high earners, we tell them to avoid Colorado.
Amendment 73 would raise the income tax by 0.37 percent on middle-class workers earning $150,000. It would impose an additional 3.62 percent tax on incomes of $500,000 or more. With a bracket of 8.25, Amendment 73 puts Colorado among 10 states with the highest income tax rates. It aligns us with New York, which imposes an 8.82 percent income tax — but only on incomes exceeding $2.1 million.
The amendment would raise Colorado’s flat corporate income tax rate of 4.63 percent by 1.37 percent. At 6 percent, we would out-tax neighboring Utah, New Mexico and Arizona.
Next-door neighbor Wyoming has no corporate income tax, as does Texas. Corporations considering relocation to Colorado would have to make peace with paying higher taxes and trying to attract executives willing to pay one of the country’s highest tax rates.
The proposed taxes will kill jobs and send businesses packing.
Amendment 73 appears to create lower property taxes for the masses. It reduces the residential school district property tax assessment rate from 7.2 percent to 7 percent. The nonresidential school assessment goes from 29 percent to 24 percent.
This may sound great to average voters. One simple amendment sticks high-wage earners with more school funding, while lowering taxes on homes and nonresidential properties.
The Colorado Education Association, the teachers union, assures us this amendment brings tax relief. In a statement, the union says Amendment 73 “reduces the nonresidential assessment rate, providing tax relief for those Coloradans who have shouldered a large burden of the local share of school funding … ”
The union could not be more openly deceptive. Although it freezes the residential assessment rate at 7 percent, a 0.2 percent reduction, estimates show the rate dipping to 6.11 percent in the 2019 reappraisal. That means the Amendment 73 raises property taxes by locking them in at a rate projected to otherwise drop.
Larimer County Assessor Steve Miller explains the scheme might starve other taxing districts because of Colorado’s Gallagher Amendment. Voters overwhelmingly enacted Gallagher in 1982 to place a higher percentage of the tax burden on nonresidential properties. It mandates owners of residential properties pay 45 percent of property taxes, while owners of nonresidential properties pay 55 percent of the tax burden.
“The economic theory underpinning Gallagher has proven a bit wobbly over time,” Miller explains in an article for CompleteColorado.com.
With passage of Amendment 73, Miller explains, Colorado ends up with two assessed values on every parcel of property in Colorado.
“Nonresidential properties would be assessed at both 29 and at 24 percent. Residential properties would be assessed at 7 percent and also at whatever the adjustable Gallagher rate is calculated to be,” Miller explains.
Through a tax calculation too wonkish to fully unpack here, Miller shows how Amendment 73 and Gallagher interact to reduce the state’s overall property valuation by at least 8.6 percent.
“The assessed values and property tax revenues of taxing authorities that are not school districts would be significantly reduced — contrary to what the amendment’s proponents advertise,” Miller wrote.
We need higher wages for teachers and more funding for schools. We can’t afford to achieve these goals with an ill-conceived law that would kill jobs, punish success, and reduce funding for nearly every tax-funded service throughout the state.
Fire chiefs, public health professionals, mayors, county commissioners, city officials — and all others who use property taxes to serve the public — need to learn more about Amendment 73. If enacted, their agencies will make do with less.