NOONAN: GOP tax bill will hit dark purple Colorado hard

Author: Paula Noonan - December 15, 2017 - Updated: December 15, 2017

Paula Noonan
Paula Noonan

Who wants to be a Colorado 8-year-old?  Raise your hand! As of now, they’re not lucky. In a decade, they’ll face the $1 trillion additional deficit end game of the December, 2017 GOP tax bill.

If the eight-year-olds still live in Colorado, they’ll already be deep under water.  In 2015, Colorado sent about $1.7 billion more to the US government than it received back, according to a Rockefeller Institute of Government report issued in September.  The state paid in $55,952,000,000 and got back $54, 267,000,000.

Another way to measure Colorado’s shortfall is by the fed’s per capita expenditure in the state.  Colorado received $7500 to $10,000, compared to states like Alabama, Mississippi, West Virginia, and New Mexico that received over $12,000.

If the GOP tax bill eliminates or reduces the state/local tax deduction from federal income taxes, and it looks like it will, Colorado’s balance of payments will get worse.  Coloradans will pay significantly more in federal taxes than they get back and thus will send even more dollars to Alabama, Mississippi, West Virginia, and New Mexico.

In other words, these southern states will be like China, getting more money from Coloradans than we get back from them.  Except that when we have a balance of payments problem with China, we’ve at least bought some goods with our money.

Our 8-year-olds feel the pinch right now.  Colorado is one of the lowest states in education funding at about $7,500 to $8,000 on average per student.  Education money comes from state taxes and local property taxes, both of which are currently deductible from federal taxes.  In fact, the $1.7 billion shortfall Colorado has with the feds would just about cover the ‘negative factor’ the state has with school funding, based on Colorado’s Amendment 23.

Even with marijuana taxes coming into the system to help with capital projects for schools, school districts struggle financially.  Rural districts can’t recruit teachers because districts don’t pay enough.  Even metro Denver districts have pay problems, such as in relatively wealthy Douglas County where teacher compensation lags other large metro districts.

It’s currently difficult for school districts to raise more money above TABOR limits for mills for operational dollars and bonds for capital expenses.  The state tried to raise taxes for public education in 2013 with Amendment 66.  That initiative bombed at the box office.

With property taxes on the rise due to higher home values, along with the loss of the property tax deduction, it’s easy to predict that any new education tax request at any level will be an impossible sell.

This scenario hearkens back to the 2017 General Assembly when lawmakers refused to put a tax initiative on the ballot.  It might have been their last chance to get an increase through.

As it turned out, legislators barely cobbled enough money to save rural hospitals from going under.  They turned themselves into pretzels to twist enough money out of mortgaging state buildings to add a minimum of transportation funding and trim back business property taxes.  Mortgaging buildings is a one-trick pony.

All of this is occurring as the state also struggles to find cash for children’s health care, low income housing, and of course, weed management.

Right now, Colorado is seeing the biggest jump in its population growth since the 1970s creating more demand for state and local government services. Some long time residents would like the growth to slow down.  Perhaps the state can gin up enough C-notes for some friendly new signs at the borders:  Newbies: Alabama gets a better tax deal.  Go there.

Paula Noonan

Paula Noonan

Paula Noonan owns Colorado Capitol Watch, the state’s premier legislature tracking platform.