Colorado’s November ballot is almost finalized. As of today, ten initiatives are set to bulk up the ballots Coloradans will cast this fall. While those initiatives might look like unrelated efforts by groups of concerned citizens, in reality most of them have been sponsored and funded by billionaire-backed right-wing organization Advance Colorado, which specializes in using Colorado’s ballot process to change state laws in ways the Democratic-majority legislature would not. Soon, they will start the process of trying to trick voters into supporting them.
As November approaches, think tanks and media organizations with close ties to Advance Colorado will flood the zone with arguments about how every initiative pushed by the group’s billionaire funders will actually, coincidentally, benefit everyday Coloradans. Think tanks like the Common Sense Institute will minimize the policies’ palpable downsides while dramatically overstating their benefits to ordinary people, and editorial pages at the Gazette and other outlets will parrot the think tank uncritically, encouraging Coloradans to vote decisively against their own best interests come November — and, no, I don’t need a crystal ball to make that prediction: It has happened many times before.
Now, as the propagandistic process I have documented at length gears up for another go-round, I want to get a jump on the half truths which will soon be spewed by going through some of the initiatives in question and looking at who their policies actually benefit, and what has happened when they have been implemented in other places. Over the next few weeks, I will look at each initiative on the ballot, culminating in a voter guide which I will publish before ballots are mailed in October.
This week, I want to start that process by looking at the initiative which — in addition to being the most naked giveaway to monied interests — I believe would harm Colorado and Coloradans most severely if passed: Initiative 232, the proposal to cap both the personal and corporate income tax rates at 4.4%.*
What Proponents Will Say
Before diving into the spurious arguments proponents will make in favor of the policy, let me dispense with the elephant in the room: the big issue with the initiative is not really the cap on your income tax. Colorado is currently one of just 15 states with a flat income tax, meaning that you and billionaire Phil Anschutz pay the same rate. At the federal level and in every other developed nation on earth, income tax follows a graduated system, in which, for example, the first $100,000 of your income is taxed at a lower rate than the second $100,000, and so on. A separate initiative to finally introduce a modern graduated tax system to Colorado, Initiative 195*, is currently being evaluated for placement on the ballot. If that initiative were to make it onto the ballot and pass, most Coloradans would not see their income tax increase by even a dime — in fact, those making less than $100,00 a year would get a tax cut — but billionaires like Phil Anschutz would be required to pay something closer to their fair share.
For Advance Colorado, that’s a problem: they don’t want Anschutz’s taxes to go up. In fact, one could argue that the organization exists almost entirely to prevent that eventuality. But Advance Colorado also has bigger fish to fry, and they know as well as I do that the real boon for the group’s billionaire backers would come from the cap on the corporate tax rate.
(Sidebar: what happens if both of the conflicting tax initiatives pass? Ultimately, that will be a question for the courts, but there are a few likely outcomes)
Back to the topic at hand: there’s no real mystery as to how Advance, its director Michael Fields, or its allies in the media will attempt to sell the massive corporate giveaway. After all, attempting to trick the working class into cutting taxes for billionaires and businesses is an old American tradition. We’ve all seen this show before.
In short, they will argue that giving money to big business and the wealthy will make all of us more prosperous, and that failing to give our tax dollars to monied interests will somehow provoke financial calamity for the state.
Right on schedule: “This is a clear counter to the far left’s attempt to hike taxes in Colorado, price people out of the state we love, and drive business out,” Fields told the Gazette, a paper wholly owned by Phil Anschutz, one of Advance Colorado’s main funders. Right-wing pseudo think tank the Common Sense Institute, which has also received ample funding from Anschutz and his son, has made similar arguments.
To summarize, Fields & co argue that failing to cap the corporate tax rate will drive businesses out of Colorado, and that failing to cap the individual income tax rate will drive high-income individuals out of Colorado. So the question becomes: is any of that based in reality?
The Truth
If Fields’ argument was based in reality, it stands to reason that we’d be able to see the effects: companies and high-income individuals would cluster into states with the lowest tax rates, right? After all, that’s what Fields casts as the inevitable consequence of failing to cap Colorado’s tax rates.
But that’s not what reality shows at all.
Now, to be clear, there are some examples Fields and other proponents will likely bandy about between now and November, but none of them hold up to scrutiny. Take, for instance, the argument that Texas has no corporate income tax whatsoever and is also home to more Fortune 500 companies than any other state, with 57. To hear Fields tell it, those companies exist in Texas not because it’s a large state with a large population, but because it has no corporate income tax.
And yet: California, a state with a corporate tax rate of 8.84%, more than double the rate Advance Colorado wants to cap Colorado’s corporate tax at, is home to the second-most Fortune 500 companies, with 56 of them. Combined, those companies generated $2.7 trillion in revenue last year. And New York, a state with a corporate tax rate of 7.25% ranks third, with 53 Fortune 500 companies, who collectively generated $2.2 trillion in revenue last year.
As even a cursory glance at the economic literature will show, the choice of where a company headquarters its operations is not a simple matter of corporate tax rate. It is a complex dance of factors including access to infrastructure, resources, and employee talent. Colorado, rich with natural resources, situated at the intersection of two of the nation’s busiest interstates, and with one of the most educated populations in the nation, scores highly in all of those categories whether or not we cap our corporate tax rate.
Fields’ argument is nonsense, but that doesn’t mean that capping the corporate tax rate would have no effect. The effects of corporate tax cuts have been well-documented, and while they benefit the wealthy, they are broadly negative for the general population. Corporate tax cuts spike executive compensation, slash government revenue, and do little else other than let the already wealthy increase their profits at the expense of our roads, bridges, and schools.
Given Advance Colorado’s general policy bent, it is not uncharitable to assume that the disproportionate benefits to the wealthy are their main interest in capping the corporate tax rate. According to the Center on Budget and Policy Priorities, looking at the federal corporate tax rate cut of 2017, “a growing body of research shows that the corporate rate cut has delivered large gains to top earners but done little for everyone else.” Echoing those findings, a 2022 Yale study found that gains from corporate rate cuts “are concentrated in executive pay…while workers in the bottom 90% of the distribution see no change in earnings.”
Those gains for executives and the top 10% of earners come out of the public pocket. Right-wing economic orthodoxy asserts that cutting corporate taxes increases economic activity, thereby generating greater revenue for the state and greater prosperity for all. This religious conviction is what we call “trickle-down economics,” and every available bit of evidence contradicts it. As the Tax Policy Center succinctly put it, “the direct revenue loss from cutting tax rates almost always exceeds the indirect gain from increased activity.” Instead, the effects of the cuts would be more cuts: cuts to education, transportation, healthcare, and more. If Fields & co want to slash state revenue, their first step should be identifying which services to slash along with it. K-12? Rural hospitals? The senior homestead property tax exemption?
There’s no such thing as a free lunch; billionaires just want us to pay for theirs.
Verdict
Initiative 232 is a vehicle for corporate greed and upward wealth redistribution whose backers – despite their protestations – are likely under no illusion about the economic catastrophe it would wreak on the state. To them, the giveaway to their billionaire backers is worth it; they might even get bonuses. For the rest of us, the math doesn’t add up. Vote no.
* In the coming weeks, as the ballot is finalized, the ballot initiatives will change numbers. Initiative 232 will become Proposition [something], Initiative 195 will become Amendment [something], and so on. I’m sure there’s a good reason for this, but it’s confusing every year. After the ballot is finalized, I will update this piece to reflect the final names.
