Don’t hold your breath on proposed state income tax reduction

Cross Currents: A column by Bill Christopher
Posted 1/29/20

With the 2020 State Legislative Session less than a month into the process of making laws, it’s too early to count on any permanent state income tax reduction. Nevertheless, Governor Polis touched …

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Don’t hold your breath on proposed state income tax reduction

Posted

With the 2020 State Legislative Session less than a month into the process of making laws, it’s too early to count on any permanent state income tax reduction.

Nevertheless, Governor Polis touched on the possibility of a reduction in his January State of State Address. First, he touted the temporary tax rebate which the Taxpayers’ Bill of Rights (TABOR) will bring to corporate and individual income taxpayers. The one-year temporary rate will go down from 4.63% to 4.5%.

Secondly, he announced the creation of a bipartisan study group to evaluate options to lower the income tax rate permanently.

As my mother use to say to me when I was a boy, “We will just have to wait and see.” I say, don’t go spending any saving just yet!

Good news and bad news

In following up on the Governor’s announcement, State Senator Jerry Sonnenberg, R- Sterling, has introduced Senate Bill 20 which would cut the income tax rate from 4.63% to 4.49% permanently. You might consider that the good news.

The bad news is that the bill has been assigned to the Senate Veterans and Military Affairs Committee which is known as the “kill committee.” That is where proposed legislation often goes from the minority party to die.

Important to plan ahead

While Colorado continues to enjoy a healthy economy and tax revenues keep rolling in, it is always important to look ahead. Economic predictions still reflect pessimism with a down-turn in the economy. While it is hard to say when this will occur, state and local governments should be prepared.

If any tax is reduced permanently, it would be next to impossible to get Colorado voters to approve bringing back the higher tax rate in the future. It doesn’t take much research to point out how reluctant state voters have been on increasing any type of state tax for K-12, higher ed or transportation. I think it would be wise to leave it alone. Plus, there is another potential negative impact brewing on the horizon.

Initiative 122 would constrain Colorado’s economy

I am referring to Initiative 122, which I have written about before.

Jefferson County slow-growth activist Daniel Hayes is the author of this petition drive which would limit growth of both cities and counties along the Front Range from Weld County to Colorado Springs. Obviously, he targets the cities and counties where the most growth is taking place.

His proposal calls for no more than 1.3% residential growth per year within each jurisdiction, with everything over 1% reserved specifically for affordable or senior housing. He has announced his intention to begin gathering signatures later this month.

Getting the proposition on the ballot is no small undertaking. It takes 124,632 valid signatures to be collected over a maximum of six months to place a proposition on the ballot. Such a scale of signature collecting requires either paid circulators or a huge number of volunteers to succeed.

What should be state government’s role?

Regardless of the state income tax reduction issue, the State Legislature has a dilemma: With more and more voters angry over the amount of new development in the targeted areas — those include Adams and Jefferson counties and most of the others, as well as cities like Boulder, Westminster and Thornton south to Colorado Springs — it raises the question of what the Legislature can or should do to address growth.

Should decisions and mandates made at the state level have control over local governments’ policies involving the amount of growth?

Perhaps actions from the state should be less direct on cities and counties. For example, the Legislature could impose criteria on which local governments receive state Department of Transportation funds for streets and bridges, based on having certain growth limits in place.

It also raises the question of how the Legislature should approach the 2020-2021 Budget. If Initiative 122 does get on the 2020 Presidential election ballot and if it passes, it would take effect on Jan. 1, 2021. That would mean that half of next year’s state fiscal budget year would be impacted by some degree with reduced residential construction. Subsequent fiscal years would feel the full impact.

However, the proposition does contain the following language, “Beginning 2023 such growth limitations may be amended or repealed by initiative and referendum or otherwise remain in effect.”

One size fits all won’t work

As I previously wrote about Initiative 122, I do not believe this is the best option to tackle the amount of residential growth in the Front Range area.

First, a one size fits all approach is not appropriate or workable. There are differing needs and desires within the various cities and counties along the Front Range area.

Secondly, such an initiated state statute usurps municipal home rule cities’ decision-making authority on such growth management issues. Fundamentally, I believe that each home rule city should decide its own pace and volume of growth. Cities differ on the amount of raw, vacant land available for more housing and apartments.

For example, the City of Thornton has considerably more raw land available than Westminster does. On the other hand, the Cities of Northglenn and Federal Heights are basically built-out and are surrounded by adjacent municipalities. Also, available water resources vary from city to city and from water district to water district.

Local decision-making should control

In the case of the Cities of Boulder, Golden and Lakewood, there are already residential growth limits in place. If Initiative 122 is more constraining on those respective cities than their own limits, does that mean that the locally determined growth constraints are tossed out and Initiative 122’s limits dictate?

Also, let’s consider the case where a community or county, through its governing body or citizen-initiated petition process, is successful in passing a less restrictive growth limit after Initiative 122 is in force. Which limiting plan would prevail? Would it be the one which the local community supports, or the plan dictated in Initiative 122? There are plenty of cross currents in this whole issue of limiting residential growth and legal questions to boot!

Stay tuned to see if sufficient valid signatures are achieved to place the issue on the November ballot.

Bill Christopher is a former Westminster city manager and RTD board member. His opinions are not necessarily those of Colorado Community Media.

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