(The Center Square) – Colorado needs to prioritize essential issues and return to principles of free enterprise, according to the 2023 edition of the “Colorado Free Enterprise Report,” by the Common Sense Institute.
“Colorado policymakers will face tough decisions with high inflation and a potential recession on the horizon,” the report said. “To ensure a stable and competitive economic position, a reprioritization of essential issues and a return to the principles of free enterprise in addressing those issues will keep the state on the right path through economic uncertainty.”
The 52-page report reviewed eight policy areas: jobs/economy, education, energy/environment, health care, housing/community, infrastructure, state budget and taxes/fees. The Common Sense Institute, a free-enterprise research organization focused on the state's economy, rated policy areas on a five-point scale. Jobs/economy and state budget were rated highest (4s) while housing/community received the lowest (1).
“To be clear, these findings are not presented as the final word, nor the only valid perspective on Colorado’s free enterprise system,” the report said. “CSI acknowledges that different observers, when presented with the same information, can reasonably disagree about the meaning and significance of that information. What is important is to start a conversation.”
Despite the high rating, the report forecasts a negative outlook for the state’s jobs and economy due to workforce issues, inflation and “the strong possibility of a recession.” The report also warned of the impacts of new state regulations and workforce programs like Paid Family and Medical Leave Insurance. Minimum wages in Denver and Colorado will increase on Jan. 1, 2023, increasing labor costs for some businesses.
The report gave a neutral rating to the state budget as the governor’s fiscal year 2024 proposal appropriates $40.5 billion, a 3.15% increase over the previous fiscal year. It includes a record-high general fund reserve of 15% or $2.2 billion.
The outlook for the state’s taxes/fees is neutral, according to the report. Net taxes and fees are rising in Colorado, even though voters approved income tax cuts in 2020 and 2022. Earlier this year, voters reduced the state income tax rate from 4.55% to 4.4%.
In 2023, Colorado employers and employees will begin paying a .9% payroll tax to fund the state’s new paid family and medical leave program. Voters also approved tax increases on those earning more than $300,000 annually to pay for adding students eligible for free school meals by 615,000, a 125% increase.
Colorado legislators continue to pass fee increases and tax law changes to bypass the state’s Taxpayer’s Bill of Rights (TABOR) Amendment, approved by voters in 1992, the report said. The constitutional amendment limits the amount of revenue retained or spent by state government. It requires excess revenue to be refunded to taxpayers, absent voter approval. TABOR also requires voter approval for specific tax increases.
Energy/environment and health care received negative outlook ratings. The report predicts new regulatory requirements to reduce greenhouse gas emissions for all sectors of the economy, especially for transportation and the built environment. Increases in energy prices and natural gas are forecast along with consumers being forced to purchase reformulated gasoline due to the Environmental Protection Agency’s expected ruling on poor air quality on the front range.
The report stated some health insurance carriers are leaving the state due to the “Colorado Option,” regulations reducing prices of individual and small-group plans by 10% below a 2021 baseline. Health care providers will either cut services or pass costs on to the private insurance market due to inflation, the report said.