The absence of a progressive income tax structure in Initiative 25 has stopped some progressive organizations from getting on board with State Sen. Rollie Heath’s attempt to stem what has become a yearly bleeding of dollars from public education. While Heath and others agree a graduated tax structure would have been the preferred path, they said the initiative remains education’s best tourniquet while long-term solutions are worked on.
Colorado Progressive Coalition economic justice director Corrine Fowler told The Colorado Independent that her organization couldn’t get behind a policy that would tax the poor disproportionately from the rich. She said while they had been on board with initiatives introduced earlier in the year that had a graduated tax structure, the final version of the bill runs contrary to their mission.
“From CPC’s mission statement standpoint, we can’t support an increase of the flat tax because it is totally inequitable. It creates more regressivity in the tax structure than what already exists,” Fowler said. “We think it is bad policy to raise the flat tax when a graduated income tax would raise twice as much money as a flat tax, would only raise taxes on a small portion of the population and would more evenly distribute the tax responsibility.”
The initiative, crafted by the Colorado Fiscal Policy Institute (CFPI) and others, would raise roughly $536 million per year over 5 years for the state’s preschools, k-12 and higher education systems by raising the state income tax from 4.63 percent to 5 percent and the sales tax from 2.9 percent to 3 percent. It is expected to raise $3 billion over the period. The initiative was introduced in response to three years of successive cuts to education that have caused layoffs, tuition hikes and loss of school services.
Few supporters of the initiative contacted by the Colorado Independent disagreed with Fowler’s assessment that a graduated tax structure would be more equitable and the better overall plan. However, they said a graduated or progressive tax structure that would tax individuals proportionally to their income was not favored by some business groups and others whom they discussed the initiative with. That, they said, would have resulted in considerable push back had they tried and run an initiative that include those measures.
While the income tax is not designed as a graduated model, it would in effect be marginally progressive because it is based on the Federal income tax system, according to supporters.
Carol Hedges, director of the Fiscal Policy Institute, addressed some of those concerns, explaining that they fully planned to continue work on long-term solutions that included a more progressive tax structure.
“We will continue to work with a broad coalition of folks to address real reform but for now, this proposal offers the only option to avoid further cuts in essential services in our communities,” Hedges said. “This proposal also slightly improves the progressivity of our tax system as would a graduated income tax.”
Terry Scanlon, fiscal policy analyst for the Colorado Fiscal Policy Institute, said that as a leader in pushing for a progressive income tax in the state, his organization had fought earlier in the year to create a coalition to pass just such a model. He said that in conversations with labor, progressive organizations, and business it was made clear that a progressive tax system would face significant opposition. The fear of that opposition was enough for them to pull, in March, six progressive income tax initiatives they had filed with the secretary of state and team up with Heath.
“There were a lot of meetings and in private and public conversations we became confident that we would have significant opposition to a graduated income tax. That opposition would make it much more difficult [to pass the measure],” Scanlon said.
Scanlon said that given the option of either doing nothing or doing something to help Colorado education, the choice was clear for his organization.
“We have two choices we can continue to allow cuts in services or we can invest in our state’s education. This is the best policy that is achievable,” Scanlon said.
Scott Wasserman, political director for Colorado WINS, an employee partnership that represents many of the state’s civil servants, said his organization had not taken an official position on the initiative, however, the absence of graduated income tax appears to have caused them to play a watch and wait game as it moves forward.
While he said that they would take another look at the initiative once it reaches the ballot, he explained that the organization represents many middle-class individuals who are already struggling with pay cuts and that a flat tax would disproportionately hurt them.
“One of the challenges of the proposal is that it doesn’t have a progressive tax structure,” Wasserman said. “We represent folks from the lower-middle to the upper-lower class of this country. So to say to them you need to pay more when you are already being hit hard by pay cuts–that is tough. Our preference would be that we ask corporations and the wealthy Coloradans to pay more. That said, a progressive income tax makes a lot of very powerful people very angry.”
Heath said he had initially favored a graduated tax structure for his initiative, but, after discussions with the Institute and others, he dropped the idea concerned that it might hamper his desire to bring more funding into state sponsored education.
Another supporter of the initiative, Great Education Colorado, said they were also disappointed that the bill did not include graduated income tax language, but they saw future cuts to education as unacceptable.
“This isn’t the initiative that we would have chosen or written, but … instead of comparing Initiative 25 to what could be, we need to compare it to what will be if it doesn’t pass,” Lisa Weil, director of policy and communications for Great Education Colorado, said. “For us, we just decided that it is like a tourniquet and we have to stop the bleeding. This will be the fourth year of actual cuts to per pupil funding. We just decided for ourselves that we couldn’t stand by and watch that happen.”
Weil said that cuts to education often struck the poorest in society the hardest and said the income tax was linked to the federal tax structure which is progressive, though she acknowledged it was by no means the ideal. She said a more direct graduated tax would have been the superior plan and said they would be willing to support future initiatives that included that tax model.
“The sales tax exempts food and prescription drugs so that will have less impact on low income and our flat tax is based on a progressive income tax federally, so it has some progressive components as it is. It is based on a progressive income tax,” Weil said.
“We acknowledge that k-12 education has taken the brunt of the budget cuts,” Fowler said. “That’s why we understand why groups like Great Education Colorado are supporting it, because, of course, k-12 has seen cuts and there are imminent cuts on the way. We understand that. [B]ut for us it is not just about raising revenue, it is about reforming our tax system. We believe that we need real comprehensive reform and this also creates a situation if it passes where the voters of Colorado are going to believe that we have solved that issue. So it creates barriers for us for future solutions. That is really worrisome.”
Heath said that the 5-year plan was designed to ensure that voters knew it was only a band-aid for a wound that needs intensive care. “I had, in fact, favored an indefinite initiative… ,” Heath said.
“Of course, this is a band-aid as I say in all of my presentations. We need a structural fix and this is designed to buy us the time to get this done. I believe this will accomplish just that,” Heath said.
Great Education Colorado like other members of the coalition supporting the statutory change, say they are being very clear that this is not a solution but simply a way to stop education cuts while long term solutions are conceived.
“It is only a 5-year fix, this is not the end of the conversation, it is the beginning of the conversation. But it is the tourniquet that keeps the patient alive until we can come up with a long-term solution,” Weil said.
Wasserman, however, urged some caution. He said any attempt to put initiative 25 on the ballot and into law needs to happen in a way that allows it to serve as a focal point for constructive discussion on future fiscal fixes even if it is defeated.
“I think the general fear is if it gets to the ballot it is important that if it dies it dies a noble death, because the worst thing that could happen is this thing gets on the ballot and it just gets crushed and opponents of taxes say, “What part of no don’t you get” [in future initiative campaign attempts].
Asked why they didn’t decide to protect the revenue from possible legislative action by asking voters to place the language in the Colorado constitution, Scanlon said the coalition behind the initiative simply had no desire to add to the nearly unchangeable and convoluted budget structure that has given legislators and policy makers headaches over the past decade. However, he said he felt education dollars would remain safe.
Scanlon said that legislators would be taking a big risk if they chose to overturn the will of the people to fund education with the tax revenue.
“If they do that they will be reversing the will of the people. That is a pretty tall order for the legislature,” Scanlon said.
Mike Wetzel, Colorado Education Association’s public relations director, said his organization was not supporting or opposing the initiative, but encouraged members to collect signatures.
Asked why they chose to stay neutral on the initiative, Wetzel said, “Our leadership carefully examined the initiative and this is the decision they made.” He said he could offer no other information on the decision.
Scanlon said that the initiative will likely make it on the ballot.
With a needed 86,105 signatures to place the measure on the ballot, Scanlon said the campaign had already garnered 105,000. However, the campaign hopes to have 125,000 before turning them into the secretary of state’s office on Monday in case some of the signatures were found to be invalid.
Fowler said the Colorado Progressive Coalition plans to file a progressive income tax initiative in coming years and continue down the path already laid by the Fiscal Policy Institute and others.
“We are keeping that plan in place and looking at 12 or 13, though we have not committed to a year,” Fowler said.
It appears clear that many of those now supporting 25 will also be backing the Colorado Progressive Coalition’s plan in the future.