Another Day, Another Liberal Proposal To Increase Taxes

Tim Hoover of the Denver Post reports that the liberal group The Colorado Center on Law and Policy is back with a flurry of new proposals they say will solve the state “budget crisis” by raising more “revenue.”  That means higher taxes.  Businesses generate revenue; governments extract taxes.

This time around, CCLP wants to move from Colorado’s 4.63% flat personal income tax some form of graduated income tax that sticks it to the “rich” and corporations:

All six of the initiatives would impose a graduated individual income tax, replacing the state’s current flat income tax of 4.63 percent. But the graduated income tax is complex, imposing differing rates of taxation on segments of a person’s income.

For example, while the highest rate for individuals would be 9.5 percent, this would only apply to income earned over $1 million a year. Income earned below that would be taxed at various lower rates, so for example, the same person’s income would be taxed at just 9 percent for the portion between $500,000 and $1 million a year.

The lowest rate would be 4.2 percent, which for an individual would apply to taxable income of $50,000 or less.

Four of the six proposals would raise the state’s corporate income tax from its current 4.63 percent to 7 percent, and two of the six proposals would require that all corporations pay a minimum of $1,000 a year in state income tax.



This is an indescribably bad idea, but I will attempt to describe just a few of the ways. 

First, higher income people are more mobile than others.  There is a vigorous debate about how many of them will leave a state that targets them with personal income tax increases, but it is almost certain that some will flee to friendlier places.  The last thing we need is for our most successful and productive citizens — in particular entrepreneurs — to leave town.

Second, many corporations are also mobile.  When choosing where to locate, or whether to re-locate, one factor is the tax burden of a particular state.  One huge weakness in Colorado is its failure to attract Fortune 500 and 1000 corporations who provide steady employment to large number of people.  Raising corporate income taxes will make them even less likely to set u shop here.

Third, higher marginal tax rates have been shown to have a significant negative impact on economic growth.  Growth in Colorado is already anemic; this is a terrible time to smother it with new taxes.

Fourth, does the word “California” mean nothing to these people?  There is a strong correlation between higher income tax rates and profligate spending and debt.  Here is a chart from the Washington Times last year:

 Mugshot

Politicians will raise taxes, spend more, then seek new “revenues” once again when they run out of (our) money.  That is the cycle TABOR was intended to break.  It may not be perfect, but it is far better than the alternative.

Once again, politicians will promise to reduce spending while actually increasing taxes.  The tax increases will be absorbed through new spending, and the promised spending reductions will disappear into the pockets of public employees, unions, “green energy projects,” and myriad other special interests.  

If I had proof that those running our government could and would actually show some seriousness with regard to the budget, I could accept some form of modest tax increases to get us down the path of fiscal sanity.  That proof can only come through concrete steps that first actually reduce spending, control public employee compensation and benefits, and reform entitlements.

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Published in: on February 4, 2011 at 2:31 pm  Leave a Comment  

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