Ganahl’s plan to eliminate Colorado income tax is short-sighted, say political experts

Economists and policy pundits slam Republican gubernatorial candidate Heidi Ganahl’s plan to eliminate Colorado’s income tax as a short-sighted idea that would drastically reduce the state’s ability to fund its programs the most crucial.

“Naïve, to say the least,” said Sven Steinmo, a political economist who teaches at the University of Colorado at Boulder and studies taxation and democracy.

“There’s this populist antipathy to taxation in the United States generally, and in Colorado. An easy thing for a politician to promise is to cut taxes, but the reality is that government needs revenue. If you eliminate income tax, the state of Colorado would essentially shut down,” he said.

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Colorado’s 4.55% income tax accounted for more than $11 billion in fiscal year 2021-22 and is the state’s largest source of general fund revenue.

Ganahl, a University of Colorado regent, wants to cut state income taxes over two terms as governor by converting Taxpayer Bill of Rights refunds into permanent income tax cuts. income, which would require legislative cooperation and voter approval. It is according to a one page wide posted on his campaign website last weekend after months of questions about how his plan worked in detail.

In years where the TABOR annual revenue cap is exceeded by a certain amount, the state has temporarily reduced income tax to 4.5%. This happened in 2020 and 2021. This year, the TABOR refund was instead administered through a one-time check to taxpayers.

When you say reckless things like “We can reduce state income tax to zero and we’ll be fine,” you’re intentionally misleading and poorly educating voters, which leads to confusion and frustration.

– Scott Wasserman, President of the Bell Policy Center

In addition, Ganahl wants to reduce the size of government overall by 10% by instituting a hiring freeze on all state government positions and having an independent auditor find ‘waste and fraud’ in the budget. of State.

“There are a lot of ways to cut that down in eight years,” she said during a candidate forum hosted by Colorado Concern on October 5. “I’m very confident that we can do it.”

She said Colorado can replace lost revenue by attracting new businesses and industries.

8 States Without Income Tax

But economic and political experts say that if the income tax were eliminated, sales or property taxes would have to be raised to offset the revenue, or the state would have to cut public services like public education, maintenance roads and law enforcement.

“She’s avoiding any specifics about the public service she wants to cut in government,” said Scott Wasserman, president of the progressive Bell Policy Center.

Theoretically, Ganahl’s proposed audit of state government would identify areas for reduction.

Wasserman criticized the idea of ​​using TABOR repayments as a plan mechanism as one that could leave Colorado vulnerable in the event of an economic downturn.

“We can cut the income tax rate in TABOR surplus years, but the first time we hit a major recession, those dollars will be gone forever,” he said. “It shows a fundamental misunderstanding of what happens when you lower the income tax rate during a TABOR excess year.”

There are currently eight states with no personal income tax: Wyoming, Washington, Texas, Tennessee, South Dakota, Nevada, Florida, and Alaska.

“A lot of states that don’t have income taxes tend to be the most regressive states,” said Aidan Davis, director of state policy for the left-wing Institute on Tax and Policy. economic. Often, states with no income tax have higher sales taxes, she said, which affects lower-income residents more than wealthy people.

Additionally, states with no income tax tend to rely heavily on natural resources or the tourism sector.

“Not every state is in a position, like Alaska, to sit on a massive amount of oil and gas,” Davis said. “It is very rare that a state can abolish its income tax without a really extreme situation allowing it to do so.”

Besides the policy idea itself, Wasserman said he was worried about the impact of Ganahl making the income tax plan a cornerstone of his campaign.

“When you say reckless things like, ‘We can reduce state income tax to zero and you’ll be fine,’ you are intentionally misleading and poorly educating voters, which creates confusion and frustration,” he said. “This isn’t just campaign rhetoric – if people are led to believe this they might vote for income tax cuts in the future and then wonder why our schools are underfunded or our classrooms are too big or why there are so many potholes in our roads.”

Ganahl’s opponent, incumbent Democratic Governor Jared Polis, has also said he supports the elimination of state income tax, but in conjunction with higher taxes on things like pollution and cigarettes. Politics is not a central part of his re-election campaign.

Colorado voters will decide on a measure in November on whether to cut income tax to 4.4%.

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