Progressive tax push could cripple Colorado’s economy

By Robert G. Natelson | Commentary, Complete Colorado

At a time when most states are cutting income taxes, some influential Colorado leftists want to jack up the state’s top income tax rate to one of the highest in the nation. They are hawking a “graduated” (or “progressive”) tax—that is, one that discriminates based on income. They promote this scheme with their usual demagogy, including the fraudulent claim that higher taxes will harm only “the rich.”

In truth, it will harm almost everyone but the rich.

Much of the Left’s demagogy is harmless, and some of it is even amusing. But this irresponsible scheme is positively dangerous. As explained below, it’s a revolver in a game of Russian Roulette aimed against the livelihood of Colorado families. A revolver with every chamber loaded.

As also explained below, what Colorado actually needs to stay competitive is to cut income tax rates, not raise them.

Taxes and state prosperity

In a previous Independence Institute paper, I cited some of the studies showing how taxes interact with state economies. Taxes, to be sure, are only one factor. But they affect most of the other factors.

The evidence shows that high tax levels promote stagnation, while lower ones (above a minimum level, assessed everywhere), promote prosperity.

Some of these studies are pretty nuanced. They measure the tax burden in different ways and measure relative prosperity in different ways.

Some studies explore the effects of taxes on states in the same part of the country. Others separate out the effects of different kinds of impositions. From the latter surveys, we’ve learned that “graduated” income levies are especially harmful to economic opportunity. This may be partly because income (unlike most sales or property) already is taxed at the federal level, so state income levies are a kind of “double taxation.”

More significantly, graduated income taxes punish the very people who (as a group, not invariably) would otherwise help the economy the most.

That last point is important. The people hurt most by punitive graduated levies are not “the rich.”

READ THE FULL COMMENTARY AT COMPLETE COLORADO

Editor’s note: Opinions expressed in commentary pieces are those of the author and do not necessarily reflect the opinions of the management of the Rocky Mountain Voice, but even so we support the constitutional right of the author to express those opinions.