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 comments from the public for each of the two drafts they produce for each measure. More information on the Blue Book drafting process can be found here and here.
Initiative 31 would reduce Colorado’s flat income tax rate from 4.55% to 4.40%, savings taxpayers an average of about $120 per year. If adopted by the people of Colorado this November, the measure will constitute an equal income tax rate reduction for every Colorado income tax payer. Independence Institute President Jon Caldara, together with state senator Jerry Sonnenberg, initiated the citizens’ ballot measure as part of a broader effort to eliminate the state’s income tax altogether.
Independence Institute’s Fiscal Policy Center previously reviewed the first draft of the Initiative 31 draft analysis — currently called “Proposition ?” in the draft until a proposition number is determined — and submitted comments for review. The center subsequently reviewed the second draft analysis after its public release on July 21st.
Independence Institute submitted the following comments on the second draft to LCS. Each comment begins with a reference and LCS’s draft language followed by comments and suggested new language:
Initiative 31 Blue Book 2nd Draft Comments and Suggested Changes
Starting on page 2, line 10, the current draft reads—
In some years, the state income tax rate is temporarily reduced to 4.50 percent in order to pay back a portion of the amount the state collected over its revenue limit, which the state is required to return to taxpayers. The tax rate was reduced to 4.50 percent in 2020 and 2021, and is expected to be reduced to 4.50 percent in each of 2022 through 2024, to return money to taxpayers.
- I have no problem with this being added for context, but I think it’s important to note that this change is at the legislature’s discretion. In general, LCS could provide more relevant details to the paragraph simply by avoiding passive voice. For example, rather than saying, “…the state income tax rate is temporarily reduced…,” say “the legislature temporarily reduced the income tax rate.” If done well, changing to active voice would both provide more information to readers and allow LCS to reduce the total word count, as in my suggestion below.
When state revenue exceeds the TABOR limit, the state constitution requires the legislature to refund the surplus dollars to taxpayers. The legislature chose to issue a portion of the TABOR refund through a tax rate reduction to 4.50 percent in 2020 and 2021. It may use this and/or other methods to administer any future refunds.
Starting on page 2, line 19, the current draft reads—
This amount represents a reduction in expected state General Fund revenue of approximately 2.4 percent.
- As I noted in my comments on the 1st draft, it’s misleading to voters to talk about General Funds only. LCS and policy wonks know that GF revenue is the smallest of the state’s three major revenue streams: GF, cash funds, federal funds. To a voter, however, leaving out this context is misleading via omission.
This amount represents a reduction in expected state General Fund revenue of approximately 2.4 percent and a reduction of approximately XX percent of total state revenue.
Starting on page 2, line 22, the current draft reads—
State income tax collections are the main source of General Fund revenue. The General Fund is the main source of state revenue used to pay for general government operations such as education, health care, human services, and corrections. In state budget year 2020-21, the state income tax generated $10.7 billion, which accounted for 68.4 percent of General Fund revenue. In addition to General Fund revenue, the state budget also includes money from federal funds and other taxes and fees. More information about the state budget can be found here: https://leg.colorado.gov/explorebudget/
- I appreciate that LCS took some of my comments on the 1st draft under consideration here. That’s reflected in the addition of the sentence regarding other state revenue sources. With the change, however, this paragraph continues to obscure the true impact of a 0.15% reduction in income tax. The current draft still conveys the falsehood that GF revenues are the main source of state revenue.
Starting on page 2, line 22, the current draft reads—
State income tax collections are the main source of General Fund revenue.
- As I noted in my comments on the 1st draft, this is true but misleading via omission. State income tax collections are the main source of General Fund revenue, but nowhere near the main source of state revenue. This wording makes the impact of this income tax rate reduction appear larger than it is to anyone who does not have a thorough understanding of how the state generates revenue. According to LCS’s own data, the General Fund made up only a quarter (24.9%) of state revenue in FY2020-21. That compares with 31.3% from Cash Funds and 43.8% from Federal Funds.
State income tax collections are the main source of General Fund revenue, which accounts for less than a quarter of all state revenue.
Starting on page 2, line 11, the current draft reads—
The General Fund is the primary resource for financing state government operations, including education, health care, human services, and corrections.
- The 1st draft said: “The General Fund is the main source of state revenue used to pay for general government operations such as education, health care, human services, and corrections.” In response to my comments on the first draft, LCS appears to have changed “source” to “resource” and “revenue” to “financing.” These are merely semantic differences and did not change the facts of what I commented regarding the 1st draft—that the statement is patently false. The General Fund was the smallest of the three main sources of state revenue (or “resources for financing state government operations”). It appears that—rather than objectively providing useful and accurate information to voters—LCS is bending over backwards to distort voters’ perceptions and make the impact of this small tax rate reduction appear larger than it is.
- As I commented on the first draft, this sentence still falsely implies that the state relies mostly or exclusively on General Fund revenue to finance education, health care, human services, and corrections in the state when, in fact, state revenue from Cash Funds and Federal Funds contribute a significant portion of the financing of these state activities.
The General Fund is the smallest of the three main revenues sources for financing state government operations such as education, health care, human services, and corrections.
Starting on page 2, line 13, the current draft reads—
In state budget year 2020-21, the state income tax generated $10.7 billion, which accounted for 74.5 percent of General Fund revenue.
- I’m disappointed that LCS did not take my comment on this sentence into consideration. The intent of the Blue Book is to inform voters and provide accurate and useful context for the measures on their ballot. Like the two sentences before it, this sentence distorts the context of the measure by cherry picking data and omitting other relevant information. A voter who is not already an expert on the state budget, looking to the Blue Book for objective context to inform their vote, would likely conclude from this that three-quarters of state revenue would take a hit if this measure were adopted.
In state budget year 2020-21, the state income tax generated $10.7 billion, which accounted for 74.5 percent of General Fund revenue, or 18.6 percent of all state revenue.
Starting on page 2, line 26, the current draft reads—
In addition to General Fund revenue, the state budget also includes money from federal funds and other taxes and fees. More information about the state budget can be found here: https://leg.colorado.gov/explorebudget/
- I appreciate the addition of this context to address my comments on the previous draft. Together with my other suggested changes for this paragraph, voters will have sufficient context to understand how income tax collections are spent as a part of the whole of state spending. With this addition alone, however, it appears that LCS is continuing to engineer a particular perception from voters by providing certain details in the text that might put the measure in a bad light, while delegating the full context to a link.
Starting on page 2, line 30, the current draft reads—
How does Proposition ? affect state spending?
The measure’s effect on state spending depends on whether state revenue is above or below the constitutional revenue limit, which is called the Taxpayer’s Bill of Rights (TABOR) limit. Money collected under the limit may be spent or saved, while money collected over the limit must be returned to taxpayers. The money that is returned is called the TABOR refund, and is different from the refund a taxpayer gets when they overpay their income taxes. During years when the state collects money over this limit, Proposition ? will reduce the amount of money returned to taxpayers and will not change the amount of money available to pay for state operations. During years when the state collects less than the limit, Proposition ? will reduce the amount of money available for state government operations. The state currently expects to return money collected above the limit through at least budget year 2023-24.
- I appreciate the inclusion of this section in response to some of my comments from the 1st As written, however, it provides an overly verbose and complicated explanation, rendering it of little use to voters. If LCS wants a reader to read and absorb the information they present, making the most important points up front and using clear concise language is key. If LCS is committed to keeping this language as is, however, they could add tremendous clarity by answering the question in clear simple terms at the beginning of the paragraph before going into a more detailed explanation. As is, the paragraph never directly answers the question. A voter looking for a clear answer to a simple question would not find it here. I provide it below as a suggested addition.
Add to the beginning of the paragraph,
Based on current state estimates, the measure would not impact the state budget for at least the first three budget years that it is in effect.
Under Arguments For Proposition ?
Starting on page 4, line 2, the current draft reads—
Proposition ? permanently lowers the tax burden on families and businesses. The state government currently collects more taxes than it uses for the programs it funds, and, in fact, more tax money than it is legally allowed to spend. Proposition ? ensures that this money remains with families and businesses in the future rather than paying for a larger government bureaucracy.
- This is the first argument voters will see from the proponents. It should be the most compelling argument and end with an impactful statement. This does not do that. The last sentence in particular reads like a strawman argument inserted into the proponent statement by the opposition. My suggestion incorporates LCS’s changes from the 2nd draft but strengthens the argument.
- The second sentence repeats the second proponent point. Let’s stick to one argument per point and make each the strongest it can be. The argument in the first point is that a tax cut would help struggling Coloradans. The argument in the second is that the state can afford a small income tax rate reduction.
At a time when historic inflation has made it increasingly difficult for families and small businesses to make ends meet, Proposition ? puts more money in Coloradans’ pockets by providing all taxpayers with an equal income tax rate cut. Particularly during difficult times, individuals, families, and small businesses do better when they can keep a little more of their own money rather than giving those dollars away to politicians and bureaucrats to spend for them.
Starting on page 4, line 8, the current draft reads—
Even with the tax decrease under Proposition ?, the state budget is expected to increase in the next budget year, thus resulting in no overall decrease in the state budget in the near future. The measure is a modest change and is not expected to reduce funds available for state operations for at least the next few years. Households that are struggling and foregoing basic purchases need their earnings more than the state government does.
- The first two sentence make the argument well, but they’re simply not as compelling as the language I suggested in my comments on the 1st Again, that last sentence sounds like a stale proponent argument inserted by the opposition. My suggested language below combines the strongest arguments from the LCS 2nd draft with some compelling facts. It also eliminates the final sentence included in the 2nd draft.
Over the last 20 years, the state budget has nearly tripled, increasing every year with two exceptions. This year the legislature passed the largest budget in state history. Even with the tax decrease under Proposition ?, the state budget is expected to increase in the next budget year, thus resulting in no overall decrease in the state budget in the near future. The measure is a modest change and is not expected to reduce funds available for state operations for at least the next few years. The state has sufficient funds to finance its operations. Many households that are struggling and foregoing basic purchases do not.