Over the last month, 10 initiatives have been filed to reduce taxes and government funding in Colorado. They would make our unfair tax code worse while hurting public services by ensuring a permanent reduction in revenue. With Democrats in charge of the legislative and executive branches of Colorado government — not to mention every statewide office but one — conservatives are using the ballot initiative process to try and enact every policy change they want. Because the only real obstacle to accessing the Colorado ballot is money — something anti-tax advocates have not been shy about using in the past — so it is much easier to qualify for the ballot than go through a legislature that has been vocal about not enacting unending tax cuts without paying for them. 

With progress having been made in Colorado on a number of fiscal fronts — repealing the Gallagher Amendment, positive economic forecasts leading to adequate levels of funding, and other good aggregate economic news — these measures pushed by anti-tax groups will have the effect of rolling back these improvements. Going backward at a time when we are finally seeing some incremental forward momentum would hurt Coloradans and only lead to more income and wealth inequality.

The filed ballot titles fit into three categories: property tax decreases, income tax decreases, and transportation funding. Below are the types of initiatives that have been filed to be on the 2021 or 2022 ballot, and the problems they present for Colorado’s future.

Property Taxes

The Gallagher Amendment, which governed how property taxes were determined since it was enacted in 1982, was repealed at the ballot last November through Amendment B. The Gallagher Amendment’s constitutionally mandated ratio between property taxes from non-commercial properties and commercial properties would have forced a steep drop in non-commercial property taxes. That would have led to $500 million in lost revenues for school districts and $200 million in lost county revenue. Fortunately, Colorado voters repealed it. 

Now Colorado Rising Action, the anti-tax group responsible for many ballot measures, is seeking to lower the assessment rate for residential and commercial property through the ballot. While this would not put the Gallagher Amendment back in place, it would deprive local governments of millions upon millions of dollars — potentially upwards of a billion dollars of lost revenue statewide — that support schools, first responders, trash collection, and other municipal services. This could be an initiative on the ballot this coming November 2021.

Income Taxes Rates

Republicans in the legislature have tried to pass an income tax rate decrease many times over. As we have pointed out repeatedly, a decrease in Colorado’s flat income tax would benefit wealthy Coloradans disproportionately, not to mention significantly reduce the state’s ability to adequately fund public services. Last November, Colorado voters did vote for the income tax decrease. Our state’s income tax rate went from 4.63 percent to 4.55 percent as result, giving the top 3 percent of Coloradans (in terms of income) nearly $200 million in tax cuts.

Now they are back to try and reduce taxes for the wealthy even more. There are two different initiatives — each filed for 2021 and 2022 — that would reduce the income tax rates again. As mentioned above, any across-the-board income tax rate reduction would disproportionately help the wealthy, who do not need it, while depriving Coloradans of important public services.

Transportation

The other important initiatives that have been filed have to do with transportation funding. Finding funding for transportation has been a constant problem in Colorado with voters rejecting various measures in the past and legislators having difficulty finding dollars within our states’ strapped budget to fund the necessary improvements in our infrastructure across the state. There is hope that a new proposal from legislative leadership and the governor will make a lot of progress on this confounding question.

However, those who do not want government to have more revenues are itching to put a new measure on the ballot that would divert existing governmental dollars to transportation. This would likely reduce the amount of money available for other public services. This measure has also been filed for both 2021 and 2022.

Takeaways

While none of these proposed measures have gotten very far along in the ballot initiative process yet, we have to keep a close eye on them. What they all have in common is they will make our currently upside-down tax code even more unfair, while depriving Colorado and its local governments of necessary revenue to adequately fund services upon which we all depend.

Furthermore, the American Rescue Plan — the most recent COVID-19 relief bill signed into law by President Biden — prohibits states from using federal funding to backfill lost revenue from tax cuts. These measures would not only deprive our state of revenues, but would force Colorado to send back funds to the federal government that have already been allocated to our state. Colorado is set to allocate close to $6 billion over the next few years from the American Rescue Plan and there are many places that need short-term help that will help in the long term. Education, transportation, higher education, and other infrastructure needs are very present in Colorado and that money will help to build some structures for long-term use, but if tax cuts eat into the state’s budget, then some of that money would have to go back to the federal government, giving our budget a double whammy. 

There are many groups in this state that are determined to make taxes on the wealthy as low as possible and starve state and local governments of revenue. That will end up forcing local government to rely on regressive taxes — those that hit low-income Coloradans and marginalized communities the hardest — to fund public services, or those governments will have to reduce program support, including needed transportation upgrades, education, first responder support, and other essential services. While the budget picture is much more optimistic now than it was 12 months ago, that will not be the case forever, and depriving our governments of funds now will hurt us when the revenue forecast changes.

The Bell Policy Center will be closely monitoring these measures going forward and we will be working to educate Coloradans about the negative consequences to our state they will bring.