Sunday, October 27, 2013

Ballot initiatives, 2013 edition: Colorado's Amendment 66

Amendment 66

  • Would increase income taxes of those making up to $75,000 to 5%
  • Would increase income taxes of those making more than $75,000 to 5.9%
  • Raise income tax to raise spending level on funding public school districts and charter schools
The argument:

If Amendment 66 passes, public school funding will rise from $5.5 billion to $6.4 billion and there will be a $50 million increase in charter school funding.  Currently, in Colorado, state income tax is 4.63%, regardless of income.  This measure would increase income tax on all Coloradans.  Most school districts are funded through property taxes, but this amendment would provide for a new method of funding for school districts.  The language of the amendment scares some, as it allows for legislators to be able to adjust the income levels for the income tax increment and requires that 43% of state income to be set aside to pay for public education.  Many people believe the scare tactics that legislators will use this initial tax increase to raise taxes even higher on everyone.  Even though, it is just as likely that legislators will raise the income level higher to be taxed at the highest rate.  

Most arguments against the bill, revolve around the tax hike by focusing on total numbers.  Editorials will talk about the overall revenue impact of the state, saying that it will raise taxes by $950 million, the first year and $1 billion in years after.  But that ignores the impact on each person.  If you look at the impact on an individual level, you might see a slightly different tale.


Income ($)
Income tax at 4.63% ($)
Income tax at new level ($)
35000
1620.5
1750
45000
2083.5
2250
55000
2546.5
2750
65000
3009.5
3250
74999
3472.45
3749.95
75001
3472.55
4425.06
85000
3935.5
5015
95000
4398.5
5605
100000
4630
5900
150000
6945
8850
250000
11575
14750
350000
16205
20650
450000
20835
26550
550000
25465
32450

Understandably, those making just over $75,000 will have some complaints, as it is mainly just an arbitrary number that is thrown out there.  But for the most part, this is not a huge tax increase.  

Another argument against Amendment 66 is that it takes control away from local school districts.  Since funding for most school districts is individually done at the local level, people fear that the funding from the state will not help the individual districts.  But supporters of the amendment offer up the idea that the districts will be allowed to spend the money how they see fit when it is distributed to them.

Some opponents of the Amendment argue that it provides for inequities of taxation for certain people.  The Independence Institute found that Boulder, Douglas, and Jefferson counties would pay 32.2% of the new taxes but only 17.7% of new funds would go into the education system in these counties.  This is a product of progressive taxation, especially when it is applied to an education funding system, such as this.  Their other complaint of the system is that 20.9% of students attend schools in Boulder, Douglas, and Jefferson counties but they will only receive 15% of new funds in their school districts.  Meanwhile, Denver and Aurora counties have 14.3% of students but they receive 22% of new funds.  Unfortunately, I cannot find their actual report to see what they have to say about the current inequity in the system.  My guess, is that they believe inequities are inherent in any educational system but it is totally unfair to burden those who are wealthier.  Why would those who are in worse off schools need more funding than those who are in better/wealthier schools?  That's a new inequity and is totally unfair, right?  But anyway, the basic argument proposed by this line of reasoning is that the current system which relies on property taxes at the local level should not be changed because they have worse schools in the poorer areas and better schools in the more affluent areas.  Any efforts to change this, including raising taxes, places undue burdens on the more affluent and creates an inequity in the system.

But like almost all education reform, the real anger for the amendment is really focused on the teacher's unions.  Colorado's State Treasurer Walker Stapleton argues that the new funds will pay for rising pension costs and health care costs for teachers, as opposed to paying for improving education.  But since the funds will be held in the State Education Achievement Fund, they can only be used for education reforms and enhancements to existing programs.  But even if you believed that pension funding is harmful to education, you might support the amendment because it sets aside a significant amount of taxpayer money strictly for educational use.  But at least the Chamber of Commerce understands the anger at teacher's unions, David May, President and CEO of Fort Collins Area Chamber of Commerce, said that the real problem is that people are passing off fiscal reform of the education system as real education reform.  Colorado gubernatorial hopeful, Greg Brophy said that we have thrown enough money at education reform and we need to focus on teacher effectiveness.

But what about costs of the Amendment being passed?  The University of Denver issued an analysis that found that increased funding would result in lower crime rates and health care savings due to improved lifestyle choices due to a more educated public.  The study concludes that there would be a lower dropout rate which would also reduce welfare spending and the state's unemployment rate.  The University of Colorado's school of finance found that the increased spending in education would reduce health care costs, increase property values, lower unemployment insurance payments, lower welfare payments, and would have an overall increase of the state's GDP of $139 million over the next 25 years.  Not to be outdone, the University of Colorado's school of business found that in the first five years, the economy would slow and there would be a reduction of personal income (obviously, since it's a slight tax increase) and a reduction in employment costing the state $224 million in economic activity.  But, the Colorado Center and Law Policy concluded that states with a higher investment in public education have higher median wages and above average economic activity.  Mothers of students in full-day classes as opposed to half-day classes have an increased likelihood of finding full-time employment.  

My take: While I can see, why there is some contention over the increased taxes, the truth is I would not be impacted very much by the increased taxes if I was a Colorado resident.  Additionally, I would put my faith in the majority of studies that find the benefits of increased spending or investment in public education.  I think that a small increase of spending on income taxes, for people, would be helpful for the public good. I do not find the arguments against the amendment to have much merit.  If I was making just over $75,000 per year, I might have a different thought process as I would oppose the arbitrary number that is involved in setting the higher taxes, but I would still vote the same way that I would vote now.  While I would oppose the income level set, I would still vote for this additional increase, I would not have a problem with it. Still, I would vote yes for the passage of Amendment 66.  

 

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