Boost Colorado at 21 Percent Off
By Chris Stiffler
As mail-in ballots are set to go out this week, Colorado voters face a decision on a slight increase in their personal income taxes to generate much-needed resources to help Colorado’s schools prepare our kids to compete in the 21st century global economy. What many people might not realize is that not all of the $950 million resulting from approval of Amendment 66 would come out of the wallets of Coloradans. Around $200 million will come from a reduction in taxes owed to the federal government.
Here’s why.
Because what we pay in personal income taxes to Colorado is deductible from federal income taxes for those who itemize their tax returns, what you would pay in additional taxes for Colorado schools under Amendment 66 could lower the amount of taxes owed to the federal government. So, every five dollars raised by Amendment 66 produces a one-dollar cut in federal taxes owed by Colorado residents. This essentially gives Colorado’s schools a $950 million dollar injection at 21% off.
The deductibility issue is further explained in an analysis of Amendment 66 prepared by the Institute on Taxation and Economic Policy, a non-partisan, nonprofit organization in Washington DC, and can be found here. In addition to the data about reducing federal taxes owed, the ITEP report also shows how Amendment 66 makes overall Colorado’s taxes fairer for everyone.
Today, Colorado’s highest earners pay a much smaller share of their income in state and local taxes (4.6 percent) than the state’s lowest earners (8.9 percent). This is due primarily to Colorado’s sales tax, which tends to hit low-income families hardest because those families must spend most or all of what they earn on items subject to tax just to get by.
ITEP explains that most states partially make up for the lopsided impact of the sales tax with a personal income tax that has higher rates on higher levels of income. But Colorado’s personal income tax has just one rate (4.63 percent) for everyone, making it less effective than other states in equalizing the impact of state taxes. The two-step tax structure proposed by Amendment 66 will help even out this imbalance – and boost Colorado’s future economic prospects.
See the info-graphic about A66 making Colorado’s tax system more fair here.
See how A66 reduces the taxes owed to the federal government with this info-graphic.
