As previous posts have discussed, if enacted, Proposition 103 would temporarily raise both the state income tax rate (back to its 1987 level) and the state sales and use tax rate (back to its 2000 level). The full text of Proposition 103 includes the following statements:
1. The revenues raised by the increase in taxes imposed pursuant to this measure may be collected, kept, and spent notwithstanding any other limits in the constitution or other law (meaning that the Tax Payers Bill of Rights (“TABOR”) Amendment, the Gallagher Amendment, Amendment 23, and Referendum C do not apply to these additional funds).
2. All revenues raised by the increase in taxes imposed pursuant to this measure…shall be appropriated by the general assembly only for the costs of public education from preschool through twelfth grade and public post-secondary education.
3. Allocation of moneys required by this section be in addition to and not a substitute for moneys otherwise appropriated by the general assembly, which shall be in an amount not less than the amount appropriated for fiscal year 2011-12.
What is the source of the funding?
4. Five percent is imposed on the federal taxable income (which is an individuals’s total income minus adjustments and tax credits/payments), as determined pursuant to section 63 of the internal revenue code, of every individual, estate, and trust
5. Prior to the application of the rate of tax prescribed in subsection (1), (1.5), or (1.7), or (1.9) of this section, the federal taxable income shall be modified as provided in subsections (3) and (4) of this section.
6. SECTION 3. 39-22-301(1)(d)(I)(I), Colorado Revised Statutes is amended, and the said 39-22-301(1)(d)(I) is further amended by the addition of a new subsubparagraph to read:
39-22-301 Corporate Tax Imposed. (1)(d)(I) A tax (of 5%) is imposed upon each domestic C corporation and foreign C corporation doing business in Colorado annually in an amount of the net income of such C corporation during the year derived from sources within Colorado….
For those of us who prefer the bulleted format, here is a summary and what I believe to be some implications of key issues, concerns, and contradictions in the full text of this proposition:
1. The last time that Coloradans voted to allow the legislature to decide how to use funding that was promised to go at least in part to education, it was used on transportation (Referendum C in 2005). That is probably why this proposition includes explicit language that these funds must be used for public education.
2. Allocations of money from this proposition must be in addition to 2011-2012 fiscal year levels, even though it is already publically acknowledged that the fiscal year 2012-2013 that will be released on election day is likely to include cuts of $50 million to $100 million. The expectation of cuts is according to Lt. Governor Joe Garcia when he spoke to the Colorado Commission on Higher Education at their meeting on October 6, 2011, just before the CCHE voted to endorse the proposition.
3. Individual income taxes are based on “adjusted gross income” that preferentially benefits individuals who can itemize deductions.
4. An apparently new 5% tax on corporate income, although I do not fully understand how much these corporations currently pay in state income taxes, and cannot follow the FYI handout on the topic of corporate taxes provided by the State.
In my opinion, this Proposition is at least partially an attempt to fix the lack of education funding provided by Referendum C (from which the majority of funding went to non-education-related, yet still vital, state projects and it’s two years of no additional revenue due to the economic decline that began in 2008-2009) and TABOR which has left Colorado with a permanently diminished tax base due to the resetting of tax limits based on the previous year’s revenue. This “ratchet” effect means that once the economy starts growing again, government revenue use is limited to the rate of inflation plus population growth. In lay terms, I think this means that if inflation is 1.0%, and population holds steady, a revenue drop of 10% in one year would require that state spending drop 9% (on a year to year basis) for the following year. This would be the case even if by chance the next year’s revenue bounced back to its original level. In other words, it would take 10 years to return to the baseline spending authority. [I am open to correction of this analysis because I am not sure if I have stated this correctly.]
At the end of the day on November 1, I fear that the voters of Colorado will not have had enough unbiased information to determine one way or another whether this proposition will do what it is purportedly intended to do.
I share your fears about the vote in November. I also fear the proposed cuts to higher eduction that are on the table and the implications that not passing 103 could have.
ReplyDeletehttp://www.ednewscolorado.org/2011/10/06/25963-cche-endorses-proposition-103
TABOR makes the issue even more challenging now that the rainy day has turned into a deluge over several years. While contains language that explicitly states the funds must be spent on education, the concern I have over remains its lack of clarity on what goes to K12 and what goes to higher eduction.
I am curious how we can continue to cut funding for higher education in the double digits year after year and expect their to not be consequences. Colorado remains one of the most educated states in the country, what a shame that we cannot find a way to invest in the education of our own residents.
Perhaps, instead of focusing on band-aid fixes like Proposition 103, maybe we should focus on repealing TABOR. This amendment has caused many problems over the years to many sectors including education and public works.
ReplyDeleteI agree that we need to find a temporary fix to save public education, but perhaps the five years that Proposition 103 will give us will help us frame an argument against this restrictive amendment.