Despite his libertarian rhetoric on the campaign trail, Governor Polis is pushing for the largest single tax increase in Colorado’s history.
Despite his libertarian rhetoric on the campaign trail, Governor Polis is pushing for the largest single tax increase in Colorado’s history.
W e used to think that there might be a unicorn in Colorado — Jared Polis, the Democrat governor who supports tax cuts and limited government. This year, he proved unicorns don’t exist after all.
Governor Polis declared during his State of the State address in January that Colorado should use its large revenue surpluses to buy down the income-tax rate. Now he wants the state to keep and spend the surpluses instead.
If approved by voters this November, his plan — Proposition HH — would constitute the largest single tax increase in state history. It would expand the state budget by an additional 25 percent every year forever, adding up to $65 billion over the next two decades and an increasing amount thereafter.
Over the summer, John Stossel interviewed Polis. He teased the interview, saying, “Is there a Democratic governor who actually stands up for economic freedom? Yes!” Other outlets have called him a “libertarian Democrat” and “the most libertarian Democrat in America.” Indeed, I praised him for supporting the income-tax cuts put forward by my libertarian-leaning think tank, Independence Institute, and for agreeing that Colorado should eliminate its income tax. But he has a disappointing record in office.
The alleged “libertarian Democrat” champions limited government and free markets in rhetoric but often advances antithetical policies in practice. That’s why earlier this year I called on him to show leadership on tax cuts during his second term, not just with words but with action. Rather than lead on the issue, he has chosen to abandon his libertarian image altogether.
Rahm’s Rule
Coloradans face an astounding 40 percent average increase in property taxes this year. Instead of delivering relief, Polis followed Rahm’s Rule: “You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things that you think you could not do before.”
In 2019, the governor attempted to abolish Colorado’s constitutional limitation on government growth with Proposition CC. Voters turned it down at the ballot box. This year, his Proposition HH attempts to accomplish what he could not do before.
Colorado’s Taxpayer’s Bill of Rights — commonly called “TABOR” — limits the growth in annual state spending to population growth plus inflation. When the tax code generates revenue above the cap, TABOR requires the state to refund the excess collections to taxpayers. The government may keep the surplus only if voters consent.
With Prop HH, the state seeks voters’ permission to keep taxpayer refunds and use the money to expand government. But voters won’t learn that by reading their ballots.
The ballot question for HH begins, “Shall the state reduce property taxes for homes and businesses . . . ?” Nowhere does it mention TABOR, tax hikes, losing refunds, or expanding state government.
Polis’s entire proposal, down to the deceptive ballot language, aims to capitalize on the property-tax crisis to achieve what Colorado Democrats could not do before — win voter approval for the largest-ever tax increase and expansion in state government.
The Nuts and Bolts of Prop HH
If voters approve Proposition HH this November, it will not reduce property taxes. Its adoption would merely produce a slightly smaller increase. Polis offers voters this modicum of property-tax relief on the condition that voters hand over billions of dollars in future tax refunds to the state government.
The assessment rate for residential properties sits at 6.765 percent, and all homeowners enjoy a $15,000 exemption on their home’s taxable value under current Colorado law. Proposition HH would lower the rate by 0.065 percent and amend the exemption to $50,000. For a typical homeowner, this might translate to a $750 increase in property taxes rather than $1,000. After the first year, taxes would continue to trend up at the same pace they would absent HH.
Coloradans should be outraged that lawmakers offered neither real property-tax relief now nor long-term reform to control future tax growth. But it gets worse.
Proposition HH would increase the state’s constitutional spending limit by an extra 1 percent annually forever. Historically, TABOR has limited the growth in state spending to about 4 percent each year. That means the adjustment would increase the rate of growth in the state government by about 25 percent annually. Therein lies the brilliance of the governor’s ploy.
Polis’s plan would speed up the rate of growth in government, increasing taxes more and more as time goes on. This compounding effect means it would transfer about $167 million more from taxpayer to the state in the first year, $1 billion in year five, and $2.5 billion in year ten.
This translates to a $5,119 tax increase for an average household over the first decade, according to the Common Sense Institute. Because HH expands government on a year-over-year compounding basis, the tax increase jumps to more than $25,000 over two decades, assuming that economic and revenue trends continue.
Polis tells voters HH will provide hundreds of dollars in property-tax relief but will take only $45 from each person’s refund next year. He talks about the first year only, because his plan frontloads the property tax “relief” while the tax increase gets larger and larger with time.
Responding to this obvious ruse, local 9News anchor Kyle Clark put it best: “Governor Polis, smart man. That does not mean, however, that Coloradans are dumb.” Even left-leaning journalists know that HH is a tax hike. For evidence, look no further than who supports it and what they say they want.
Elected Democrats put the measure on the ballot. Their party platform says, “Repeal TABOR,” as their No. 1 goal under “taxation.” The endorsement list for the measure contains all the usual culprits who support tax increases and oppose tax cuts every year. Every progressive in Colorado did not suddenly do a 180 and decide to support tax cuts and limited government. Conversely, the groups opposed are those who regularly oppose tax hikes.
A year ago, a casual observer might have wondered which camp Colorado’s “libertarian” governor belonged in. There remains no doubt today.
Polis Abandons Zero-Income-Tax Proposal
The Wall Street Journal called Polis’s plan a “back-door tax hike.” Right-leaning pundits and legacy-media outlets alike have called him out for his sleight-of-hand proposition, but it’s more two-faced than what most commentators have acknowledged.
In his January State of the State address kicking off his second term and the 2023 legislative session, Polis repeated his call for Colorado to “reduce the income tax rate for everybody” and “continue to make progress” toward zero income tax. He explained that Colorado should buy down the income-tax rate with the “healthy budget surpluses from our strong economy.” He’s talking about the TABOR surpluses that returned $750 to every taxpayer last year.
This makes sense. Rather than collecting extra revenue just to return it to taxpayers, the state should reduce the income-tax rate to prevent overcollection. Shortly after Polis’s address, I applauded the governor for his remarks. His call to lower income taxes echoes what Independence Institute calls its “path to zero” plan. The approach already enjoys broad support among voters.
In 2020 and 2022, citizen initiatives by Independence Institute president Jon Caldara reduced the state’s flat income-tax rate from 4.63 percent to its current 4.4 percent. Last year’s tax cut won with a 30-point margin. These two tax cuts set the path-to-zero plan in motion. Despite these rate reductions, however, ballooning state revenues continue to produce multi-billion-dollar TABOR surpluses.
This year, refunds will exceed $800 per taxpayer. Current surpluses could buy down the income tax rate to 3.81 percent without ever affecting the state budget. The resulting tax-revenue reduction would simply eliminate the overcollection that the state must return to taxpayers.
Polis proposed the right policy at the right time during the State of the State address in January. But over the 120-day legislative session, he did nothing to advance this agenda. Instead, on May 1 he announced his plan to increase state taxes by billions of dollars.
If the governor gets his way with Proposition HH, the state will keep and spend the TABOR surpluses he previously proposed using to buy down the income-tax rate. His proposal directly impedes the policy he advocated just four months prior. You can’t have it both ways, Governor.
Running as a limited-government Democrat, Polis won reelection last year with the largest margin of any Colorado governor in 20 years. Facing a term limit, he could buck his party with near impunity and stand for the principles he espouses. But a lame duck always shows his true nature.
With Proposition HH, Polis exposed himself. The grandiloquence that earned him the reputation of a libertarian-Democrat was political theater, meant only for the campaign trail. He’s no unicorn; he’s a donkey.