Insights: Tax reform loot comes in a mixed bag for Colorado
Author: Joey Bunch - January 23, 2018 - Updated: January 24, 2018
There’s no denying that the tax overhaul delivered by the Republicans and President Trump put money in Colorado’s pocket, albeit wealthy people and corporations did better than most of us.
In the wake of the new law, minimum-wage workers at Walmart are getting a pay raise to $11 an hour, even as thousands of their colleagues were simultaneously being let go as the company closed 60 Sam’s Clubs stores. The good with the bad, much the same can be said of Colorado’s give and take from this tax-reform equation.
If the online calculators are correct, I should save enough on my taxes each year to pay for a nice vacation, if I vacation in Minnesota. Every time I enjoy a walleye sandwich or a bowl of wild rice soup, that helps grow Duluth’s economy.
The economic rush of raises at Walmart and walleye in Duluth must sustain itself indefinitely, however, because it has to pay back a $1.5 trillion hole blown into the already $20 trillion national debt. Tax cuts or not, the debt already was projected to grow to $30 trillion by 2030.
But Republicans say the economic growth that will spring eternal from tax reform will eventually help pay down the debt, not feed that balloon with more hot air. “It explodes an already exploding deficit,” Colorado’s Democratic U.S senator, Michael Bennet, told Fox31’s Joe St. George.
Republican Sen. Cory Gardner saw it from an ideologically different point of view.
“It brings home the $2.5 trillion in foreign profits U.S. multinationals have abroad and levels the playing field so American companies will invest here at home — creating hundreds of thousands of jobs, driving up wages and boosting America’s economy,” he said.
Rich Jones, the policy and research director at the left-leaning Bell Policy Center in Denver, said history and logic don’t support Republicans on this.
“It will push a lot of money to the high end,” he said of the already wealthy. “It will create greater inequality, and income inequality has never been for good for economic growth. People at the top invest money, they save a lot of money, but they don’t spend a lot of it. We’ve got a 70-percent consumer driven economy, so it’s much better if you put some of that money into the hands of people who are going to spend it, and put it right back into the economy.”
But here’s one way the tax cuts could prove more than a sugar rush for Colorado’s economy.
If a deal gets done on roads in Colorado this year, if schools get more money and far-flung rural communities get lightning-fast internet service, you can thank Republicans in Washington, even if they didn’t mean to do it.
The tax bill signed by the president eliminated a truck full of deductions in favor of a lower federal tax rate. Colorado’s tax laws, however, remains the same, so fewer federal deductions means the state has more taxable income from which to take a bite.
That government math gave the Colorado General Assembly somewhere between $196 million and $340 million more to play with in next year’s budget. Right now a steel-cage death match is cornering up under the Gold Dome over how much of that windfall can be steered into transportation and for how long.
Republicans, who hold a one-seat Senate majority, want $300 million a year locked into the budget to repay bonds to fast-track transportation projects. The state would get cracking on widening chronically jammed sections of interstates 25 and 70. Republican gubernatorial candidate Doug Robinson told me onstage the Western Conservative Summit last summer that it’s time to think about blasting another hole through the Continental Divide. That can’t be cheap.
Hickenlooper suggested $148.2 million this year, and some more next year to be determined later on.
Colorado is taking the short money on the tax bill; what we get now we’ll pay back much more later on to continue public services, so cutting the size of government, of course, is a win-win for the GOP. At the state level, if we issue bonds using budget money during the good times, when the economy cools, those bonds must be paid back first, leaving schools and social services to be cut down the road.
The governor has concerns about the federal tax plan, beyond what it means to Colorado now and in the future, however.
“One thing to look at is a huge chunk of that tax cut is going to publicly traded company on the New York exchanges,” Hickenlooper told reporters in his office a couple of weeks ago. “It’s worth pointing out, and I’m surprised the media hasn’t covered it more, is we’re told that 30 percent of those shares that are in publicly traded American companies are owned by foreigners.
“Did we really take several hundred billion dollars and add it to our national debt to give a bonus to admittedly our friends and investors in foreign countries? I don’t think that plays very well with people.”
Hickenlooper said such unintended consequences happen when one party pushes through a bill too fast before it’s parsed out for problems. He cited the Affordable Care Act.
Moreover, there are other needs for some of that money, with economic consequences, the governor said.
“Is there anybody arguing that this country isn’t woefully lacking in investment in infrastructure right now?”