John Horner and Bruce Fogarty
Much of the current legislative debate in our state centers on the question of whether we should raise taxes as well as cut spending to cover the looming deficits in both state and local budgets. On the spending side, the arguments fall into two broad categories: reducing waste and fraud, and resetting governmental priorities. We agree that the costs of government services should be constantly reviewed to maximize their efficacy and efficiency — as the City Committee is doing in the case of the city of Colorado Springs — and that in a representative democracy, citizens should decide what services are appropriate for governments to provide. Both are ongoing concerns of a responsive government and its citizens. Our purpose here is not to confront either of these issues, but instead to challenge the popular misconception on the part of many citizens and lawmakers that Colorado state taxes are high.
First, “high” begs the question of compared to what? Proponents of low taxes claim that low taxes are the key to economic development, by playing a role in where businesses choose to locate and how much citizens have to spend. Conversely, businesses look to government to provide infrastructure and services — such as highways and public education — that form the basis for industry and attract high-quality workers and their families. Thus it makes sense to compare Colorado’s tax burden to that of other states. All states have to work under the same overarching federal structure and provide essentially the same basic set of governmental services. (For instance, education dominates the budgets of all states.)
Next, there are numerous ways to raise revenue. Everyone is conscious of income and sales taxes, but there are many taxes and fees collected by states—most of these you pay directly, some you pay indirectly. For example, if you looked just at state individual income tax revenue per capita, you’d find that Colorado ranks 19 out of 50 in the amount our citizens pay in income taxes ($813 per person). New Yorkers pay the most ($1,793), while citizens in seven states pay no income tax at all. But this comparison of tax burden is deceptive.
Those no-income tax states don’t simply provide services without any revenue; they make it up using other taxes and fees. For instance, two no-income tax states, Texas and Tennessee, have two of the highest sales taxes in the nation, 6.25 percent and 7 percent respectively. Colorado has one of the lowest with 2.9 percent. Texas had the 17th highest state and local property taxes in 2008.