On tax issues, Governor Jared Polis is to the right of his party’s mainstream and often a sole voice of moderation.
Voters in the Centennial State chose Democrats — but also a popular reduction in the state’s income tax.
L ast week, Democrats won every competitive statewide race in Colorado. They gained seats in both chambers of the state legislature. Yet Coloradans also voted to reduce the state’s income-tax rate, making Colorado the only state to do so via a ballot proposition this year.
Independence Institute president Jon Caldara sponsored a citizen ballot initiative to reduce Colorado’s flat income-tax rate from 4.55 percent to 4.4 percent. Voters approved the measure, Proposition 121, with a 65 percent majority.
It marks the second consecutive election in which voters have approved a citizen-initiated income-tax-rate reduction sponsored by the Independence Institute. In 2020, voters approved Proposition 116, which cut the rate from 4.63 percent to 4.55 percent, by a 15-point margin. This year’s measure passed by over a 30-point margin.
Over the last two years, state legislatures in at least 18 states have enacted reductions in their states’ individual or corporate income-tax rates. In Colorado, however, the Democratic-controlled state legislature refused to advance income-tax cuts. Republicans had introduced legislation each of the last two years to reduce the state’s income-tax rate, but the Democratic majority killed the bills in committee. So, citizens took matters into their own hands.
Colorado’s results have confirmed a replicable strategy for phasing out income taxes in a deep-blue state turning bluer each year — a strategy Colorado’s Democratic governor has so far supported.
Colorado’s Democratic Governor Supports Tax Cuts
While the measure received the support of Governor Jared Polis, it undoubtedly would have won without it. Likewise, Polis surely would have won his reelection bid had he stayed silent on the measure. Only outright opposing it would have hurt him politically. He was smart enough not to do that, but he also never volunteered his support for reducing income taxes. He broke with his party and supported income-tax cuts only when backed into a corner.
When the Independence Institute — the center-right public-policy think tank where I serve as fiscal-policy-center director — put Proposition 116 on the ballot in 2020, Polis remained silent on the measure until the Colorado Springs Gazette asked him whether he would support it. He replied via text message: “Sure! [A]n income tax cut is broad-based relief and not only helps families get by in a challenging time but also helps our economy grow.”
He neither said nor did anything else to advance the measure, but when it passed, he sang its praises.
Nine months after voters approved Proposition 116, Polis spoke up on tax relief again, this time proposing elimination of Colorado’s income tax. At the conservative Steamboat Institute’s annual Freedom Conference, an interviewer asked him point-blank what the ideal income-tax rate should be. “It should be zero,” he said.
Tax reform became an important topic in the gubernatorial race this year after the Independence Institute put Proposition 121 on the ballot. When a moderator asked Polis directly during a televised debate whether he supports the measure, he replied, “I’ll be voting for that initiative.”
When Polis voiced his support of income-tax cuts, he received recognition — including from me — at the state and national levels. But he has not yet shown true leadership on the issue; his support for tax cuts has been in response to the actions of others. With his reelection now secured, the governor will have the opportunity to show true leadership on income-tax reform during his second term.
Colorado’s Path to Zero Income Tax
While Polis publicly supported zero income tax, he has provided almost no concrete details on how he plans to achieve it. He has only said that he wants to eliminate the income tax without reducing the state budget. He proposes replacing the nearly $12 billion in annual income-tax revenue with a carbon tax. Such a plan, however, runs into problems if Polis succeeds in his stated goal of making Colorado 100 percent renewable by 2040.
In a gubernatorial debate last month, Polis was questioned on an Independence Institute report that revealed this contradiction: “If we have no pollution to tax, where does that money come from?”
After dodging the question by attacking the tax plan of his Republican opponent, Polis gave a vague answer about needing to “look at other ways to offset the elimination or reduction of the income tax.”
My recent report comparing Polis’s proposal to eliminate the state income tax with that of his Republican rival concluded: “Rather than outlining serious and thorough policy plans for voters to evaluate, Polis’s rhetoric on zero income tax — and carbon taxes — appears only to serve the purpose of courting political audiences.”
Fortunately, he has options for eliminating the state income tax without relying on a carbon tax to replace it and without jeopardizing the state budget.
When Polis told the moderator in the October gubernatorial debate that he planned to vote for Proposition 121, he immediately followed that statement, saying, “It’ll likely come out of surplus funds, so it won’t force any cuts in the budget.”
The governor was referring to the five consecutive years of revenue surpluses the state currently expects to send back to taxpayers, as required under Colorado’s Taxpayer’s Bill of Rights (TABOR). Polis understands that because of TABOR, any measure that reduces state revenue during surplus years will not impact the state budget — so long as the revenue reduction does not exceed the surplus amount.
This is the key to eliminating the state income tax without cutting the budget — and without the need for a carbon tax. Surpluses present the opportunity to ratchet down income-tax rates without impacting the state budget.
In an article for National Review’s Capital Matters last summer — shortly after Polis announced his support for zero income tax — I detailed the Independence Institute’s plan to phase out Colorado’s income tax. The plan, called “Path to Zero,” would require the state to issue any future TABOR refund via an income-tax-rate reduction and then make the new rate permanent. This ratchet-down mechanism would automatically reduce the income-tax rate only in years in which the state experiences a surplus.
The plan provides Polis with a viable path to accomplish exactly what he has said he wants: elimination of the income tax without reducing the state budget.
Path to Zero’s Biggest Obstacle
The biggest obstacle to income-tax elimination in Colorado is not our Democratic governor; it’s the progressives who control Colorado’s legislature. They have worked tirelessly to circumvent taxpayer protections under TABOR, increase taxes, and thwart future citizen-led tax cuts. In fact, Polis has clashed with them on several occasions over his support for tax relief and resistance to tax increases.
Frustrated with citizens’ using direct democracy to lower their own taxes, Colorado’s legislature has made efforts to prejudice voters against future citizen-initiated tax cuts. Last year, the legislature passed a law requiring tax-related ballot initiatives to include talking points intended to dissuade voters from supporting tax reductions.
The legislature passed a bill this year requiring arbitrary tax tables to appear on future tax measures. To the consternation of his party, Polis blocked the measure. So, to avoid the need for Polis’s signature, legislators sent the measure — Proposition GG — to the ballot for voter approval this year. It passed overwhelmingly.
On tax issues, Polis is to the right of his party’s mainstream and often a sole voice of moderation. His inclination to favor tax relief and fiscal restraint has helped bolster his popularity, especially among the 40 percent of voters in Colorado who register as unaffiliated.
This tendency has fomented some resentment among members of his party. After Colorado’s blue wave last week, chatter began on Twitter about the possibility of bypassing the governor’s veto to advance a more progressive agenda.
It will be up to the governor to leverage his popularity with the broader electorate to influence the direction of his party. He can start by reminding them that tax cuts are more popular with voters than most Democratic state legislators are.
Will Polis Lead?
If Polis believes what he said on the campaign trail — that Colorado is better off with lower or zero income tax — he should work with legislators from both parties to deliver additional bipartisan income-tax reductions during his second term. Given the stranglehold that far-left progressives have on the legislature, however, success there will likely fall somewhere in the range of difficult to impossible.
All of Colorado’s successes on income-tax relief so far have come via citizen ballot initiatives. Polis demonstrated political savvy when he got behind those measures. Through the ballot — without the need for legislative approval — citizens can implement a Path to Zero plan such as the one we are proposing.
Polis has an opportunity to turn his rhetorical support for a zero income tax into something more than a political calculation or matter of strategic convenience. He can turn it into a legacy of relief for hardworking Coloradans. And what a legacy that would be.