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Tax hike could end Colorado’s run as low-cost haven, experts say

By   /   August 1, 2013  /   14 Comments

By Dustin Hurst | Watchdog.org

A massive tax increase on Colorado’s November ballot could make the state less attractive to businesses and wealthy people looking for a refuge from high-tax states like California and Illinois.

Travis Brown, author of the book How Money Walks, told Colorado Watchdog that Initiative 22, a ballot measure that, if approved, would hike state taxes by $950 million each year, would repel those looking to live in a low-tax atmosphere.

“When you look at it, you’re really raising the price of work,” Brown said, noting that progressives often use taxes to discourage some behavior, like smoking. “Why wouldn’t you expect to get less of it?”

Brown’s book and website reveal that Colorado’s low taxes have made it a haven for those seeking relief from high tax states like California, Illinois, New York and New Jersey.

According to Brown’s research, Colorado gained more than $13 billion in adjusted growth income since 1995, including $4.15 billion from California, $1.49 billion from Illinois, $760 million from New York and $610 million from New Jersey.

Here’s a look at Brown’s map:

how money walks

The only anomaly among Colorado’s number was wealth that came from Texas, a state with an even lower tax burden than the Centennial State. Brown’s research, which consisted of examining IRS documents dating back to 1995, found that Colorado got $1.08 billion from Texas.

Brown has an explanation for that, though. “There’s something there that you can’t do anywhere else,” he explained, noting that Denver is an urban area with myriad recreational opportunities available in the nearby Rocky Mountains.

“We don’t say that tax rates are the only factor,” Brown said. “But, it’s a top factor.”

Initiative 22, which has major backing from the state teachers union, would raise Colorado’s income tax substantially — even more for wealthy resident. For those making less than $75,000 annually, the new tax rate would be 5 percent, up from 4.63 percent. For those earning more than $75,000, the rate jumps to 5.9 percent.

Colorado’s income tax ranks as the 13th-lowest among state that levy the charge. Seven states do not burden residents with an income tax.

If voters approve the package, Colorado would move to 15th-highest in the nation for those earning more than $75,000 annually.

Jon Caldera, an economic analyst with the Independence Institute, a Denver-based conservative think tank, told Colorado Watchdog  the tax hike would be a “job killer.”

“The biggest driver of jobs is small business,” Caldera said, noting that many small business operators file company income under individual income taxes. “It’s going to scare businesses away.”

Backers of the tax hike a busily preparing for an all-out blitz to persuade residents to accept the higher rates. According to Ed News Colorado, the Colorado Education Association, the state teachers union, contributed $250,000 to Colorado Commits to Kids, the group serving as the main proponent of the measure.

The report also notes that CEA workers also helped gather some of the signatures required to put the initiative on the November ballot.

Gov. John Hickenlooper, a Democrat, quietly announced his support for the tax hike earlier this month.

Caldera isn’t impressed.

“They call it reform, but it’s the same old thing,” Caldera criticized, adding that tax-hikers only want to throw more money at schools without providing true reform or accountability.

“I think they’re going to have a hard time selling this tax hike,” he said.

Contact Dustin Hurst at Dustin@Watchdog.org

 

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Dustin is the Social Media Coordinator for Watchdog.org and a staff writer for Northwest Watchdog. He specializes in finding government waste, reporting on elections and innovating new media strategies.

  • Concerned Resident

    I signed the initiative 22 petition but nowhere did it say anywhere on it that the tax increase was “ONLY” for individuals making $75,000 or more a year. I feel I was mislead to believe that this was actually something else. If Colorado really felt like it wants to help kids then “EVERYBODY” should put in. I have just recently started to make my way into a good career at 32 years old after serving in the military and then attending college. I am paying for my wife’s college debt of $100,000 + while she is still in school. I am also trying to pay for my masters degree, that I am enrolled in currently, while working full time. I can hardly pay my own bills right now because my wife and I are working hard to succeed in starting new careers, but you want to tax just me? If I were to say that we should raise the state tax on tobacco and alcohol to pay for the education bill I beat more then a few people would cry foul. But this is the same sort of unfair taxation on the people. If you want this bill then you should be willing to pay up with the rest of the people. So now the “American Dream” is to work your butt off to make something of yourself and then the government will take more from you to give to people who don’t or won’t work. My question is where in the world did the $75,000 cut off come from? I can’t even afford to buy a house in Denver with that and college bills. But I’m sure your all fine taxing me more right? I moved here just one year ago and thought I might be able to start a family and a new career here because of Colorado’s good economy and fair tax rates. Maybe I was wrong and it’s time for me to move on again. I would have voted for this if it wasn’t more of the same steal from the rich and give to the poor policy that everyone is so fond of. I’m not even sure this money will actually even help a single kid since I have no idea how they will spend it.

  • No1

    You need to work on your reading comprehension. The article states ” For those making less than $75,000 annually, the new tax rate would be 5 percent, up from 4.63 percent. For those earning more than $75,000, the rate jumps to 5.9 percent.” While Colorado currently has a regressive flat tax, this proposal will make it slightly progressive with somewhat higher rate for those making over 75k per year.

  • DixT

    I think they’re gonna have a difficult time selling this one to Colorado residents—especially since school districts all across Colorado also have additional tax increases for schools coming up on “city ballots,” in November—it would prove to be a DOUBLE-WHAMMY to Colorado tax-payers, and I doubt they’re going to go along with the State tax increase! Colorado voters just are not low-info voters!!!

  • DixT

    Plus, you have to remember most of this is for “schools”—yet, MANY school districts across Colorado ALSO have “tax hike initiatives” on individual city ballots for November, as well!

  • Concerned Resident

    Point still stands that at 75,000 a slightly progressive tax increase is not something most of us want. A flat tax is something I could vote for but to arbitrarily pick the number 75,000 when the cost of living in this state is getting much higher and home prices are on the rise. Even the Federal government set the tax hikes at 87,850 for single and 139,350 for joint which puts you in the 28%. On top of that I don’t have children and probably will never be able to afford to because I am paying for everyone else to have a litter of kids. Privatize the schools and get government out of it if they cant make due with the taxes they are collecting. Even this article points to the fact that more money is moving into the state to avoid crazy taxes in states like CA. I would think that would mean that we are collecting more in taxes because even with a flat rate there is more tax revenue being collected from new residents.

  • Kevin

    This is article is a real hack job! Here is the sad truth. Before the recession Colorado schools consistently ranked in the bottom three nationally for dollars per student funding (thanks to Tabor). During the recession that measly funding was hacked down by an additional 100 mill+. If you want to attract high dollar business that employs intelligent people you need to offer them good schools for their children and Colorado does not currently have those. Charter schools are not the answer so don’t even think it. Where do you think the money to run a charter school comes from? Charters are for profit businesses that earn money by convincing you to spend your child’s education voucher (tax money) at their school (business). No tax money = no charter tuition

    NEWS FLASH! LOW TAXES ARE NOT THE ANSWER TO ALL THE WORLDS PROBLEMS!!!!!! …the jobs report that came out today (08.02.13) clearly shows that government spending has been cut so far that it is now actually crippling the economy. So, rich guy, I hope you enjoy that extra money in your portfolio because you’re going to need it when the infrastructure that holds this nation together is literally crumbling under your feet and there is not the educated work force or the advancements in technology to save you. …and to you middle-class guy, these types of tax cutting, low funding policies are hurting us the most. Your salary hasn’t increased in years while every other life expense has gone up. No, this is not a result of Obomacare, it has actually been happening to you very slowly and quietly for a decade or more. Rich people don’t use local/state/federal services, that don’t give a flying hoot about the street in front of your house, the power grid that turns on the TV you are still making payments on, the neighborhood rec center where you kids swim. Don be foolish, open your eyes and take a real honest assessment of your situation. Then talk to other people, ask them about their situation, do your own research from places with actual facts (No FOX!). I think you might be shocked.

  • Kevin

    you didn’t read the entire article and the writer conveniently left out some facts. it is in this section…

    “Initiative 22, which has major backing from the state teachers union, would raise Colorado’s income tax substantially — even more for wealthy resident. For those making less than $75,000 annually, the new tax rate would be 5 percent, up from 4.63 percent. For those earning more than $75,000, the rate jumps to 5.9 percent.

    Colorado’s income tax ranks as the 13th-lowest among state that levy the charge. Seven states do not burden residents with an income tax.

    If voters approve the package, Colorado would move to 15th-highest in the nation for those earning more than $75,000 annually.”

    Though it is a misleading statement because Colorado would have the 15th-highest incom tax for people making $75,000 or more yet the article is written from the vantage point of overall income tax. the tax rate for the rest would actually remain one of the lowest. Go to colorado.gov and read the bill. It is for everybody but it is also a tiered system so the more you make the larger the increase.

  • kevin

    How would you suggest paying for “privatized schools”? Vouchers? …also known as tax money.

    You probably don’t have kids because you haven’t had a date in years due to your inability to see the big picture.

  • ALBERT E

    News flash higher taxes are not the answer to the education problem. Its always about the kids. There is no correlation between money and educational quality in the 1-12 range. Its just a ploy to help the unions!

  • Patti Sullivan Brasga Radovich

    tried to flee this madness..colorado is becoming california by degrees. make no mistake, as long as democrats are running the show colorado will become les desirable-more like detroit. taxing citizens to death isnt the answer. its getting rid of tenure and overpaid, top heavy admin!! our high school has FOUR asst principles!!! really?

  • chandlerbingco

    Wow. Progressive “tolerance” on display. Nice.

  • justbreathless

    Meanwhile Teachers Strike in at least 2 states because they must give Tests to students to see what they have learned.

    Like in NY City — 80% of High School Graduates *** cannot Read or Write.

  • Paul

    My wife and I just moved to Colorado to be near to our family and to escape California’s ever increasing taxes. Last year, the California voters (not including us) voted to approve Proposition 30, which was sold to the voters as a tax to improve the schools and “for the kids”, all messages to massage the “heartstrings” of uninformed voters.

    I don’t have any evidence so far, but as a new Colorado taxpayer (retired), it seems like Initiative 22 is suspiciously being positioned by the politicians and the media using the same propaganda as we saw in California. In reality, at least 30% of the revenue being generated by Prop. 30 in California can be used for paying for “other spending commitments”. In reality it is going straight to public-employee pensions to back-fill the seriously under -funded pension liability California has. This was never mentioned during the run-up to the vote. Being a new resident, I am seriously concerned about signs that this Democratic controlled legislature will pull the same tricks as the government in California. Are there any safeguards, transparency and accountability as to where and how Initiative 22 revenues will be spent?

    For reference, I ‘ve attached an op-ed article published in the Orange County Register in October of 2012.
    http://calwatchdog.com/2012/10/27/yes-prop-30-would-fund-pensions/

  • Asok Asus

    The Colorado Democrats have
    never met an income tax increase they didn’t love. (OK, not strictly
    true. I’m sure they would campaign against any tax increase to improve
    law enforcement, increase incarceration of criminals, or promote
    enforcement of immigration laws. But those are other stories.)

    At
    any rate, this must be the thousandth gazillionth time the Democrats
    have tried to promote an income tax increase for some “cause”. Supposing
    this passed? What then? How many more years before the “PROGRESSIVES”
    are back for more money for education because the previous ten thousand
    increases didn’t improve educational outcomes? Two years? Five years?

    Besides,
    as usual, this has nothing to do with education and everything to do
    with trying to implement a graduated income tax like California and the
    other rapidly bankrupting states have had for decades. Just another step
    away from powerhouse economic policies of states like Texas and another
    step closer to bankrupt states like California and Illinois.

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