Proposition 116 – Reduce State Income Tax Rate

Prop 116 may be the easiest ballot measure to understand this year. Colorado voters are accustomed to seeing ballot measures approving tax increases because of the TABOR requirement. However, we don’t usually see a vote to decrease taxes. Prop 116 would decrease the state income flat tax rate from 4.63% to 4.55%.

The Prop 116 campaign originated in order to counter The Fair Tax campaign which would have created 4 income tax rates instead of the current flat tax. Most people would have paid a lower tax rate of 4.58%, but earnings from $250,000 to $500,000 would have been taxed at 7%, from $500K to $1M at 7.75% and higher earnings at 8.9%.

Recommendation: NO/AGAINST

Colorado’s economy is suffering from a pandemic at the moment. Even if Colorado were in a booming economy right now and all state programs were fully funded, we should proceed cautiously before cutting taxes because of the TABOR straightjacket. TABOR reduces state flexibility – the so-called “ratchet effect” – to rebound when coming out of a recession by returning to pre-recession tax rates.

If Colorado suddenly discovered a new, plentiful source of long-term income, there would be a reason to cut state income taxes. That is not the case here. The percent decrease is so small that one might conclude that Prop 116 is an experiment to test the waters. The 0.08% change would save a taxpayer 8 cents out of $100 of taxable income. Not enough for a taxpayer to notice, but in combination with all the other taxpayers, the total can pay for a state program.

Website for the Yes side – Energize Our Economy
https://americansforprosperity.ivolunteers.com/Sign/TABOR-Initiatives
Info on a more comprehensive supporters’ website appreciated.
Jon Caldara of The Independence Institute and State Sen Jerry Sonnenberg are the initiative’s designated representatives.

Website for the No side – Protect Colorado’s Recovery
https://no116and117.com/


Approved Ballot Language

Proposition 116 (STATUTORY)

Shall there be a change to the Colorado Revised Statutes reducing the state income tax rate from 4.63% to 4.55%?

YES/FOR ____
NO/AGAINST ____

Proposition 116 initiative language filed with the Secretary of State
https://www.sos.state.co.us/pubs/elections/Initiatives/titleBoard/filings/2019-2020/306Final.pdf