Colorado covernor cheers tax cut in New Year message
In a New Year’s message, Colorado Governor Jared Polis (D) celebrated an income tax cut for the people of his state.
Under Colorado’s Taxpayer Bill of Rights law (known as TABOR), taxpayers are given rebates or tax cuts when state revenues exceed the rate of inflation and population growth.
Nebraska’s mountainous neighbor, which levies a flat income tax on individuals and corporations, will reduce its rate from 4.63% to 4.5% for 2020, resulting in a cut of approximately $428 million.
While the tax cut is temporary, Polis says he would like to enact a permanent cut through tax reforms.
“As governor I hope to deliver an economy next year and the years beyond that produces tax cut refunds more regularly, as I will work enthusiastically with both Democrats and Republicans to identify ways to make an income tax cut permanent without reducing state revenue,” Polis writes.
Polis, who campaigned as a strong progressive but is also known for sometimes having a libertarian streak, says he favors eliminating deductions and loopholes in the tax code in order to bring down the state’s tax rate.
“It is my hope that we can reduce the special interest tax subsidies that force all Coloradans to pay an artificially high income tax rate, and provide additional income tax relief to all individuals and businesses in Colorado.”
Polis explains that by reducing the income tax rate this year, the state will save individuals and businesses $2.80 for every $100 in tax they pay. Some tax policy advocates and elected officials in Nebraska explicitly say they do not believe rates of taxation have any impact on economic behavior in the state, but the Colorado governor says his plans to lower tax rates would increase economic growth.
“Simply put, I believe in science. The world is not flat; vaccinations work; and a broader base taxed at a lower rate leads to greater economic growth with the ancillary benefit of preventing the corrosive influence of crony capitalism,” Polis writes.
I found the governor’s article refreshing because it embraces both fiscally conservative and socially progressive themes to explain the basic economics behind core tax policy principles. Tax policy can be the source of a lot of false promises on both sides, and I think Gov. Polis is striking a good balance. We absolutely have to pay taxes for the services we want the government to provide, but when a tax rate is higher than it could otherwise be, people paying the tax have to give up opportunities they might otherwise need and want that impact their quality of life.
This year in Colorado, a dollar earned by anyone will be taxed 4.5 cents by the state. This year in Nebraska, a newly-earned dollar could be taxed by the state by as much as 6.84 cents for individuals or 7.81 cents for corporations, and almost every legislative session there are proposals to raise these rates. During the time of Colorado’s tax cut, there will only be six states with personal income taxes that levy a lower rate, and three states levying corporate income taxes which are lower.
On our side of the state line, there are only 15 or 16 states that levy higher income tax rates than Nebraska, depending on tax filing status, and even fewer with higher property taxes.
It should not be surprising given this difference that Nebraska is currently debating whether it needs incentive programs to persuade companies to invest in the state.
Selling tax cuts is usually good politics, and since it can easily be executed poorly, citizens are right to have some skepticism when politicians promise tax relief. But it is striking that even as Colorado grows and is said to be experiencing a time of “Californication,” some progressive Democratic leaders still believe it is in the state’s interest to have a less burdensome tax code.
Photo by Larry Johnson: https://www.flickr.com/people/drljohnson