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. LCS sent out the Initiative 31 draft analysis in late June for public comments.
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 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. Between July 6th and July 21st LCS will review all public comments from the first draft and make decisions on how to incorporate comments into a second draft, which they will mail out on July 21st for a second round of public comments.
Independence Institute submitted the following comments on the first 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 1st Draft Suggested Changes
Starting on page 2, line 11, the current draft reads—
State income tax collections are the main source of General Fund revenue.
- 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. LCS is exploiting voters’ ignorance to make the impact of this income tax rate reduction appear larger than it is. 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.
Suggested language:
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 independent clause at the start of this sentence is patently false. The General Fund was the smallest of the three main sources of state revenue in FY2019-2020 at 24.9% versus 31.3% from Cash Funds and 43.8% from Federal Funds. All these revenue sources help to finance state government operations.
- The final clause starting with “including” is also extremely misleading in the context of the sentence. It implies that the state relies mostly or exclusively on General Fund revenue to fund 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.
Suggested language:
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.
- 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 (which is untrue).
Suggested language:
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.
Page 2, line 21:
Suggestion: Add at the end of the paragraph,
Based on state economic forecasts, the measure would not affect the amount of General Fund available for the state to spend or save in state budget year 2023-24.
Under Arguments For Proposition ?
Starting on page 3, line 5, the current draft reads—
At a time when households and businesses are struggling to make ends meet, Proposition ? leaves more money in the pockets of taxpayers. Allowing taxpayers to keep more of their earnings will promote spending, business investment, and employment.
Suggested language:
At a time when historic inflation has made it increasingly difficult for families and small businesses to make ends meet, Prop ? allows Coloradans to keep more of what they earn. 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 3, line 9, the current draft reads—
Even with the tax decrease under Proposition ?, the state budget is expected to increase in the next budget year; the measure only modestly slows the rate by which it will grow. Households that are struggling and foregoing basic purchases need their earnings more than the state government does.
- It’s accurate to say the state budget is expected to increase in the next budget year, but it’s not accurate to say the measure slows the rate by which it will grow, at least not in the next budget year as the formulation of the first sentence implies. Based on current LCS forecasts, this measure will have absolutely no impact on the state budget in the next budget year. It will have an impact on general fund revenues, but the state would not be able to keep the revenues anyways due to projected TABOR refunds exceeding $1.5 billion. The measure would only decrease refunds by $382 million—not nearly enough to touch the state budget.
Suggested language:
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. Based on state economic forecasts, the tax decrease under Proposition ? will have zero impact on next year’s state budget. In the future, the measure might modestly slow the growth in the budget, though not reduce it. The state has sufficient funds to finance its operations. Many households that are struggling and foregoing basic purchases do not. This measure would give all taxpayers an equal income tax rate cut.
Under Fiscal Impact for Proposition ?
Page 4, line 19, the current draft reads—
The Taxpayer Bill of Rights Amendment (TABOR) limits the amount of revenue that the state may spend and save each year.
- The correct title for TABOR (Art. X, Section 20) is Taxpayer’s Bill of Rights in the singular possessive form.
