On Taxes, It’s Try, Try Again

Having failed in an earlier attempt to bring a tax increase initiative to state voters, the Colorado Center on Law and Policy last week submitted six versions of a reworked proposal in an effort to meet constitutional requirements.

A state panel in December rejected the group’s petition for a statewide vote on restoring the graduated income tax and putting a sales tax on services. The Colorado Title Setting and Review Board said the proposal did not comply with the state constitution’s requirement for singe-subject voter initiatives.

None of the new referendum proposals calls for extending the sales tax to services. All six would eliminate the current flat income tax rate of 4.63% for individual filers in favor of graduated tax rates based on income level.

In another contrast to the earlier attempt, the latest initiative effort does not give the Legislature the duty of establishing the new tax system. All necessary legal action is provided with the proposal, with no discretion for lawmakers.

All six initiatives are titled, “A Fair Income Tax System,” replacing the title on the original proposal: “Modernizing Colorado’s Revenue System.”

The highest rate would be 9.5% on income over $1 million a year. The lowest rate of 4.2% would be paid on taxable income of $50,000 a year or less.

Four of the six proposals would increase the corporate income tax rate to 7% from the current 4%. Two would ensure corporations pay at least $1,000 of income tax each year.

A temporary tax credit for low-income workers would be made permanent in three of the group’s proposals.

Carol Hedges, executive director of the Colorado Fiscal Policy Institute, which is part of the Colorado Center on Law and Policy, said the group is trying to shift the focus of balancing the state budget to include revenue proposals as well as spending cuts.

Hedges said with the proposed graduated rates, 60% of filers would pay the same or less in Colorado income taxes as under the current flat-rate system.

She said the group dropped the proposal to extend the sales tax because it would put a heavier burden on low-income taxpayers than on high-income individuals.

The six proposed initiatives will be reviewed Feb. 17 by legislative analysts before going before the full title and review board.

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