The state constitution requires the state to produce a voter information booklet, commonly known as the “Blue Book,” on every legislatively referred and citizen-initiated measure to appear on the statewide election ballot. The booklet, prepared by Legislative Council Staff (LCS), must provide fair and impartial analysis of each measure. LCS solicits public comments on both drafts it produces for each measure.
Independence Institute’s Fiscal Policy Center reviewed the first draft of the Initiative 195 draft analysis and submitted comments for review. LCS will review all public comments on the first draft and decide how to incorporate them into a second draft, at which point they will provide for a second round of public comments.
Independence Institute submitted the following comments on the first draft to LCS.
Title and Overall Framing – The title for Initiative 195 currently reads: Initiative 195: Graduated Income Tax
- The title is accurate but incomplete. Due to the popularity of the Taxpayer’s Bill of Rights (TABOR), it is important to clarify to voters that this measure also creates a permanent exemption of new revenue from TABOR’s constitutional revenue limit. This effectively creates a significant and growing pool of “TABOR-exempt” funds for some of the fastest-growing categories of state spending, removing the effectiveness of voter-approved fiscal restraints.
- Because economic forecasts are subject to considerable uncertainty, Initiative 195 could collect significantly more new revenue than will likely be advertised to voters in the Blue Book. Voters must understand that the measure permanently exempts the new revenue regardless of the forecasts. For example, a voter may approve at most $2 billion in new revenue, but would not be asked to retain revenue collected above that amount, as often happens and is usually expected by voters.
Page 1 under Summary and Analysis of Initiative 195
- The analysis nowhere mentions that the new graduated income tax brackets are not indexed for inflation. Although complicated, I think it is vital that voters understand that, because of inflation, Coloradans will be pushed into higher brackets without equal increases in purchasing power over time. To help explain the bracket creep problem: In 1984, the median household income in Colorado was $25,800; in 2024, 40 years later, it was $106,500. If incomes increase at a similar rate in the next 40 years, the median household income will be approximately $439,622. However, assuming a 3 percent inflation rate, the $439,622 will have the purchasing power of only $134,769 in 2024 dollars. Because Initiative 195 must be assumed to be permanent, bracket creep will, given enough time, result in higher taxes relative to purchasing power for most, if not all, Coloradans. Due to the permanent changes made by 195, the long-term consequences must be made clear to voters.
- In addition to bracket creep, the measure’s exemption of new revenue from TABOR means future surpluses above the limit will not trigger refunds to taxpayers. This permanently shifts more revenue toward state government and away from Coloradans without requiring further voter approval.
Page 3 after How does Initiative 195 change state revenue?
- While the first draft briefly explains the fiscal impacts of Initiative 195, I believe there should also be a separate section on the potential dynamic economic impacts. Higher marginal tax rates could significantly impact business location decisions, investment, Colorado’s business climate, and competitiveness. The added context that Colorado would become one of the highest-marginal-tax states in the nation could be illuminating for voters. Second- and third-order economic effects could meaningfully alter revenue projections and the state’s overall business climate.
Page 3 under How will the additional revenue be spent? – This section currently reads: The increased revenue collected under Initiative 195 must be spent on K-12 education, health care, and early childhood care and education. It must add to, not replace, spending on those services. The Colorado legislature will decide what specific programs the revenue gets spent on within those three areas.
- While Initiative 195 specifies which categories the new revenue must be spent on K-12 education, health care, and early childhood care and education, it provides no minimum allocation or proportion for each category. Voters expecting most new revenue to go to K-12 education, for example, should understand that the legislature could instead direct most of it to health care or early childhood programs. Combined with the TABOR exemption, this gives the legislature substantial discretion over billions of dollars in new ongoing revenue with limited future voter oversight.
Page 4 under Arguments for Initiative 195
- This section highlights underfunding in K-12 education and health care but does not address counterarguments regarding existing spending levels and efficiency, tax complexity, concerns about fraud, or declining K-12 enrollment. Greater balance would better inform voters.
