Understanding the Initiatives: Part 1 (Prop 101)
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Understanding the Initiatives: Part 1 (Prop 101)
by: The Bell 12/07/09 @ 03:05:05 PM MST
The Bell Policy Center is analyzing three anti-tax, anti-government
initiatives proposed for the 2010 ballot. First, a word about
nomenclature. Thanks to a change in Colorado law, ballot measures that
change laws will now be called propositions while those that amend the
constitution will be called amendments.
Proposition 101 is one of three anti-government measures proposed for
the 2010 ballot. At a time when the state is in a deep financial hole,
Prop 101 will only dig a deeper and darker hole. As the rest of the
nation comes out of a recession, this measure has the potential to
permanently lock in recessionary conditions in Colorado.
It is not going too far to say that Prop 101 could close down some
community colleges, eliminate nearly all support for higher education,
ensure that roads and bridges fall into disrepair and risk federal
matching dollars for programs such as Medicaid. That's just for
starters.
In a larger sense, Prop 101 and the other two proposals threaten the
very notion of government - the idea that public structures are
critically important in supporting a growing, thriving society and
economy.
Here's a thumbnail description of the impact of Proposition 101. Below
that is our preliminary analysis of the measure. We are digging
further into the numbers and the implications and will release a more
complete analysis soon.
Proposition 101: This is a grab bag of tax cuts and revenue reductions
that somehow made it through the single-subject requirement for ballot
proposals. In broad strokes, it would eliminate the FASTER plan for
transportation funding, in part by cutting vehicle registration fees
to $2 for new vehicles and $1 for older vehicles. It would immediately
reduce the state's income tax from the current rate of 4.63 percent to
4.5 percent, and over time cut it to 3.5 percent. And it would
eliminate all taxes and fees on telephone and satellite and Internet
services, except for 911 fees. A conservative estimate says that this
initiative will cost the state more than $1.5 billion a year (current
value).
The Bell :: Understanding the Initiatives: Part 1 (Prop 101)
Preliminary Analysis of Proposition 101
Proposition 101 ("Concerning limits on government charges") is
intended to drastically reduce a wide range of state and local taxes
and fees in Colorado.
The first sentence of the measure reads, "This voter-approved revenue
change shall be strictly enforced to reduce government revenue."
Proponents say they intend for this language to be interpreted
according to the provision in TABOR that defines spending limits. If
so, then proponents clearly intend to repeal Referendum C, passed by
voters in 2005, and impose a new, lower state spending limit moving
forward. And just like before Ref C, this new limit would ratchet down
state spending after recessions.
Proponents also intend the measure to impose new, lower spending
limits in all cities and counties in Colorado.
Based on preliminary estimates, when fully implemented the provisions
of Proposition 101 would reduce state income tax revenues by $1.2
billion per year (current value), state and local revenues from a
range of sales taxes and vehicle fees by well over $1.1 billion per
year (current value), and state revenues from telecommunications
charges and fees by $4.5 million per year.
When fully implemented, the provisions of Proposition 101 would cut
state revenue by at least:
1. $1.2 billion in income tax revenues (rate reduced from 4.63% to
3.5%)
2. $179 million in transportation revenues from elimination of FASTER
fees
3. $164 million in transportation revenues by cutting registration,
license and title fees to $10 per vehicle
4. $100 million in sales taxes from exempting $10,000 in vehicle value
from sales taxes
5. $22 million by eliminating sales taxes on rental vehicles
6. $4.5 million in telecommunications fees by prohibiting all fees,
except those to fund 911 services. Another $72 million that is used to
subsidize telecommunications services in rural areas would be cut, but
these funds go to a private escrow account and not the state.
Total equals $1.7 billion (current value)
When fully implemented, the provisions of Proposition 101 would cut
local government revenue by at least:
1. $500 million in specific ownership taxes by cutting them to $2 per
new vehicle and $1 per used vehicle
2. $100 million in sales taxes from exempting $10,000 in vehicle value
from sales taxes (based on an average 3 percent sales tax rate for
local governments)
3. $22 million by eliminating sales taxes on rental vehicles (based on
an average 3 percent sales tax rate for local governments)
Total equals $622 million (current value)
Totals do not include the loss of state and local sales taxes on
leased vehicles because we were not able to gather the necessary data
on vehicle leases to calculate this amount.
Our calculations for the amount of sales taxes reduced by the $10,000
exemption on the value of a vehicle are based on sales of new and used
vehicles at Colorado franchised new vehicle dealers only. They do not
include sales by independent auto dealers and private
individuals. ... (cont)