(The Center Square) – Colorado voters have until Nov. 3 to decide on a measure that would lower the statewide income tax rate.
Proposition 116 would cut the income tax rate from 4.63% to 4.55%, a 0.08% reduction, if approved by voters. The Centennial State's income tax rate ranked as the 7th lowest in 2018, according to the Tax Foundation.
Opponents of the measure argue it comes at a bad time with state government already fiscally hamstrung by the economic recession caused by the COVID-19 pandemic.
Proposition 116’s proponents argue it would provide taxpayers some relief during the economic recession by allowing people to keep more of their earnings.
A fiscal report on the measure from the General Assembly’s Legislative Council Staff estimates the state's general fund would see a $203 million revenue reduction in fiscal year 2020-21, and a $154 million reduction in fiscal year 2021-22, if the measure were to pass.
For Colorado taxpayers, the measure would be a 1.7 percent reduction in what they pay toward state income taxes, according to the Blue Book, the state’s ballot guide.
If passed, Coloradans making $50,000 a year would save $40; those making $125,000 a year would save $100; and those with $1 million in taxable income would save $800, according to the Blue Book.
The fiscally conservative advocacy group Colorado Union of Taxpayers (CUT) backs the measure because it “gives a tax reduction to all Colorado taxpayers preserving Colorado's flat income tax rate.”
“This measure will allow Colorado taxpayers to keep more of their hard-earned dollars and make their own decisions on how best to use these dollars rather than government,” CUT president Marty Neilson said.
A report published by the Common Sense Institute, a free enterprise think tank, found that if passed, the income tax reduction “will have the effects of reducing state revenue and adding private-sector wealth,” adding that “the true impact of the tax cut will depend upon the extent to which the state government manages a tighter budget by reducing the growth in government jobs.”
The Bell Policy Center, a fiscally liberal Colorado-based research group that opposes Proposition 116, said in an analysis that the measure is “a double whammy for almost all Coloradans.”
“Proposition 116 – by giving significantly larger tax cuts to those at the top of the income ladder – will not significantly help those Coloradans who need it most,” Joshua Mantell, a policy analyst for the center, wrote in the analysis. “At a time when the wealthiest Coloradans are increasing their wealth, a tax cut that greatly benefits the rich is not a solution to the economic problems facing Coloradans.”
The measure would further erode the state’s budget to the tune of $2 billion over the next decade, Mantell said, “forcing cuts to education, transportation, health care, and other state services millions of Coloradans depend on.”
Those cuts would also come after state lawmakers cut $3.3 billion from the state’s budget due to the economic recession caused by the COVID-19 pandemic, Mantell noted
In July, the Fair Tax Colorado campaign, which was backed by the Bell Policy Center and the Colorado Fiscal Institute, among other groups, failed to collect enough signatures to get a progressive state income tax system measure on the ballot.