A progressive income tax measure backed by a cadre of left-wing groups is out for circulation, with the goal of getting it in front of Colorado voters for the November election. Proponents claim it’s about making the rich pay their “fair” share of taxes, but as it turns out, a small minority of high income earners already pay a wildly outsized portion of the state’s income tax tab. In other words, the dreaded “rich” already pay their fair share, and then some.
In brief, Initiative 195 would remove Colorado’s flat tax (where everyone, regardless of income, pays the same percentage of tax) and replace it with a graduated, or progressive, income tax (where you pay an escalating tax percentage the higher your income is).
In both the text of the initiative and the promotional materials on the group’s site, you see the word fair repeated over and over. Quoting: “Colorado’s flat tax puts the biggest burden on those who earn the least. A graduated income tax ensures the wealthiest pay their fair share so everyone can thrive.”
How does a tax scheme which makes everyone pay the same amount burden lower income Coloradans more? In what ways could it be unfair if everyone pays the same percentage of their income?
Who pays what?
Putting aside the supporters playing fast and loose with the word “burden”–rolling in other, regressive taxes which are not part of what you’re voting on in Initiative 195–it’s worth looking at how much higher-income Coloradans are already paying. Turns out it’s a lot.
When I went and looked at Colorado Department of Revenue’s “Individual Statistics of Income Reports” and pulled numbers for the most recent tax year available, I found that the upper income brackets are supplying a (sometimes hugely) outsized portion of Colorado’s tax revenue.
By comparing the number of returns filed in a given income bracket with the amount of tax revenue from that same bracket, I found quite a disparity. People earning an adjusted gross income of between $20,000 and $100,000 a year account for about 50% of tax returns, but only about 20% of all tax revenues. On the upper end, those earning $400,000 per year and up account for about 3% of all tax returns, but contribute a startling 34% of tax revenue. You’ll also find that it isn’t until you hit incomes of about $110k to $120K per year for a household that the number of returns starts to match the state revenue from that income group.
It’s important to point out another thing. When I take these numbers I excluded plenty of Coloradans who don’t even pay income taxes and/or who earn negative incomes due to various tax credits and rebates our state offers.
If we define paying your fair share as kicking in revenue to the state commensurate with your percentage of tax filers (and thus the use of state services), the claim that the rich do not pay their fair share is patently, absurdly false. They pay an outsized share of the income tax burden in Colorado.
Waving good-bye
High income earners are not coasting along on the backs of those who earn less. They are, in fact, largely the ones paying the bills. If Initiative 195 makes it to the ballot and passes, we’ll basically just be layering an additional burden on them.
While this might feel good in the short-term (I can’t help but think the supporters here are banking on your sympathy with those who don’t have as much combined with a dose of envy) in the long-run it would be foolhardy.
No other demographic is as mobile as high income earners. If they moved to Colorado years ago because of our business friendly climate and fair tax policy, they can just as easily move from Colorado because of our new unfriendly business climate and unfair tax policy.
If that happens, I wouldn’t be surprised to find some in Colorado adopting the same attitude as Seattle’s mayor–waving a flippant “bye” to millionaires leaving Washington state–but this kind of response ignores an important detail the tax return data makes clear, those higher income folks leaving will be taking huge amounts of tax revenue with them.
And guess who will be left holding the bag? Ironically enough, it will be the very people Initiative 195 purports to want to help; basically everyone who can’t afford to just pack up and leave to get away from bad policy choices.
Cory Gaines teaches college physics and is a regular contributor to Complete Colorado. He lives in Sterling on Colorado’s Eastern Plains. He also writes at the Colorado Accountability Project substack.
