The “sunk cost” fallacy is when one irrationally adheres to a failing endeavor because they’ve already poured resources such as time, money, energy, or reputation into the effort.
Despite common sense, current events, and Colorado’s souring economic trends, the progressive left continues to sink costs into pursuing a “progressive” income tax in Colorado with Initiative 195, intended for the November ballot and currently in the signature gathering phase.
Gov. Polis Weighs In
As reported in a Colorado Sun newsletter, Governor Polis recently explained that moving to a graduated income tax system would destroy Colorado’s economy, saying it would be “absolutely devastating.”
Since Polis first campaigned for governor, he has supported lowering and ideally eliminating the state income tax, but only if the state could do so without harming the budget.
In a similar vein, he also questioned why a progressive income tax could not be designed to remain revenue neutral.
Clearly, he sees this scheme for what it really is, calling it a “big tax increase.”
But even if that isn’t enough to convince proponents that a progressive tax is wrong for Colorado, national and state trends should make it clearer.
Tax Troubles
According to the non-partisan Tax Foundation, “The 2022-2023 data confirm a clear negative relationship between top marginal individual income tax rates and net per capita migration. States with no individual income tax (Florida, Texas, Tennessee, Nevada, and others) consistently rank among the strongest gainers, while states with the highest top rates (California at 13.3 percent, New York at 10.9 percent, and New Jersey at 10.75 percent) dominate the list of largest losers”.
Mind you, migration to Colorado is already collapsing without a significant change in tax policy.
Initiative 195’s new 8.4 percent top marginal tax rate would push Colorado into the realm of the most punitive tax policies in the nation.
This year, Colorado moved lower in its state tax competitiveness ranking from 32nd to 33rd in the nation, again without a significant tax policy change.
Years of living off borrowed time are finally catching up with states like California, New York, and Washington, as their citizens are voting with their wallets and feet.
High-tax cities across the nation are facing massive budget shortfalls as their job and revenue generators leave.
Colorado is already dealing with a structural budget deficit, again without having implemented such a volatility-inducing change to the income tax system.
Instead of facing reality, the supporters of the progressive tax measure will continue to double down at the expense of Coloradans’ livelihoods. It’s apparently more important for the progressive consultant class to perpetuate their “usefulness” than to do the right thing.
