State Budgets

A Mixed Bag of Ballot Measure Results in Colorado

While some Election Day results remain murky, one thing is clear: Americans have nuanced views on matters of public policy. As one of the states that relies heavily on ballot measures, Colorado serves as a great example. On statewide ballot measures pertaining to tax and fiscal policy, Coloradans sent mixed messages. While voting to decrease income tax rates and to strengthen the Taxpayer Bill of Rights (TABOR), they also approved a costly new entitlement program.

In total, 57% of Colorado voters supported Proposition 116 to lower personal and corporate state income tax rates from 4.63% to 4.55%. While not a huge change, it’s enough to improve Colorado’s Economic Outlook Ranking from 18th to 17th best in the nation (absent any other factors), using the Rich States, Poor States “adjust policies” tool. It also means that Colorado will edge out Missouri for the 9th lowest corporate income tax rate (Missouri’s rate is 4.58%). In total, passage of Prop 116 is estimated to lower the state income tax burden by $154 million for the 2021-2022 budget year.

Fifty-two percent of Colorado voters also approved Proposition 117, which strengthens the Centennial State’s TABOR Constitutional Amendment. TABOR already required voter approval of tax increases, but now, fee increases totaling more than $100 million over five years must also be approved by voters. Since its passage in 1992, TABOR has limited the amount of annual tax revenue that can be collected. This limit is determined by a formula that accounts for the previous year’s revenue collection and population growth plus inflation. If the state revenue collections exceed this limit, taxpayers receive a refund. TABOR is considered one of the best amendments of its kind at the state level – and it will now be even better thanks to passage of Prop 117.

Despite voting in favor of these two measures to foster economic growth, 57% of Colorado voters approved a massive tax increase with Proposition 118, which will create a state-run medical leave program that is paid for with a 0.9% tax on employee pay (split between employers and employees). Prop 118 amounts to an estimated tax increase of $1.2 billion per year. So while voters did approve an income tax cut with Prop 116, employers and their employees will also be responsible to foot the annual bill of $1.2 billion for Prop 118.

By a similar margin, voters also approved Amendment B to repeal the Gallagher Amendment of 1982, which could result in lower property taxes for some businesses but higher property taxes for homeowners. Hopefully, this will drive conversations on how to best reform property taxes in Colorado. Residents should look no further than Utah’s Truth-in-Taxation law – and similar ALEC model policy – for a proven way to increase accountability and transparency while keeping property tax burdens in check.

Overall, Colorado voters delivered mixed results on tax and fiscal policy ballot measures. While the income tax rate reductions and pro-TABOR measures passed, so did tax increases to create new government programs. Keep an eye on for more analysis of 2020 statewide ballot measures.

In Depth: State Budgets

Smart budgeting is vital to a state’s financial health. The ALEC State Budget Reform Toolkit offers more than 20 policy ideas for addressing today’s shortfalls in a forthright manner, without resorting to budget gimmicks or damaging tax increases. One way to stabilize budgets over time is to embrace…

+ State Budgets In Depth