Tax-slashing proposals scare Colo. GOP, Democrats during year of voter discontent

By Ivan Moreno, AP
Thursday, October 7, 2010

Tax-slashing proposals scare GOP, Democrats

DENVER — Businessmen gather at an empty Denver Broncos stadium, with an ominous warning: The more than 70,000 vacant seats around them represent the number of state jobs that would be lost if three tax-slashing and debt-cutting measures are approved in next month’s election.

While many states are wrestling with billion-dollar budget deficits, Colorado voters are being asked to adopt ballot initiatives that would ban borrowing for public works, cut the income tax and slash local property taxes.

The net effect, once fully implemented, would cost the state $2.1 billion in revenue annually and still require an additional $1.6 billion in spending on public education, according to an analysis by the independent Colorado Legislative Council.

Advantages to taxpayers: $1,360 in annual savings for someone who earns $55,000 and has a $295,000 home.

Opponents say the math doesn’t work, that the proposals could cripple government and devastate the state economy.

Even a tea party candidate isn’t supporting all the initiatives, and a coalition of business leaders and politicians has raised $6 million to defeat the initiatives, even as polls show support faltering.

“It will plunge Colorado into another recession,” said Tom Clark, executive vice president of the Metro Denver Economic Development Corp. “And what will make it so unique in the history of our state is that it will be a voter-approved recession.”

Proponents don’t buy the doom and gloom. They said lower taxes and smaller government is the way to a better economic future.

“We’re really in a recession right now,” said Natalie Menten, campaign coordinator for the three measures. “Families, businesses, we are all trying to find efficiencies, cut down on wasteful spending. But we don’t believe the government is following the same line.”

The proposals would force the state to devote 92 percent of its budget on constitutionally required K-12 education funding, leaving little for higher education, human services and prisons and everything else, according to the report.

This year, the state faced and closed a $1.5 billion deficit in its $18.2 billion budget. It projects a $1.1 billion shortfall next year.

Menten said the Legislative Council’s analysis doesn’t take into account potential government growth if the tax cuts stimulate the economy.

The initiatives have echoes of California’s landmark property tax revolt from three decades ago — as well as the potential repercussions, said Peter Hanson, an assistant professor of political science at the University of Denver who has studied and taught about the California measure.

Proposition 13, approved by California voters in 1978, amended the state constitution to roll back property tax assessments and cap their growth at no more than 2 percent a year. Homeowners and business owners like the certainty about how much they will pay each year in property assessments.

Cities and counties rely primarily on property and sales taxes to fund their operations, and a major cut in property taxes effectively transferred funding responsibility for schools, law enforcement and other functions to the state.

That wasn’t a problem during the housing boom, when rising prices brought in more and more revenue.

But when the state runs a deficit, as it has for several years, local services see deep cuts. California has cut tens of thousands of teaching and local law enforcement jobs over the past two years, leading to crowded classrooms and fewer officers on the street.

Property taxes aside, Hanson noted, Colorado’s amendments arose under similar circumstances: Frustration with rising government spending, a conservative political ascendancy and the failure of government to act.

“California’s Legislature had an opportunity to act and it failed to take property tax reform seriously,” he said. “The effects have been Draconian. It shifted responsibility for funding public education from local communities to the state and put public education on a much less solid foundation.”

In Colorado, Amendment 60 would drastically cut school district property taxes between 2011 and 2020 and force the state to make up the difference.

Amendment 61 would prohibit the state from borrowing money for public works projects, including school construction — and local governments could borrow only with voter approval and if the debt is repaid within 10 years.

Finally, Proposition 101 would cut the state income tax rate from 4.63 percent to 3.5 percent over a period of years. It would cut annual auto registration to $10 per vehicle and exempt the first $10,000 of a vehicle’s sales price from sales tax. And it would reduce telecommunication fees.

Without the ability to borrow, the state would be unable to bond any new construction, improvements or maintenance, the analysts said.

All of it’s got many lawmakers and candidates opposing the measures.

Even GOP gubernatorial candidate Dan Maes — a favorite of the tea party movement that has railed against taxes and government spending for the past year — has said he could only support one of the three proposals, the one to cut property taxes.

His Democratic opponent, Denver Mayor John Hickenlooper, opposes all three.

Supporters of the initiatives say the state has found ways to circumvent Colorado’s current constitutional spending limits, citing a spike in auto registration fees, as a recent example.

Proponents have so far raised only about $14,000, but disenchanted voters like Sue Ellen Gilbert may be their biggest campaign asset.

“I’m gonna vote for them because government has all this money and they’re not disbursing it wisely,” said the retired school teacher from Cortez, in southwest Colorado. “Believe you me, if they need money, they’ll find it.”

Floyd Ciruli, an independent pollster, said support for the tax proposals may be waning, with almost no high-profile endorsements or campaign.

But opponents are not taking any chances.

“You get concerned about having to fight upstream against that because people have this predisposition, this idea that this is about us against the government and it’s not,” said construction company executive John Beeble. “I mean, we need government, even at it’s most basic level.”

___ Associated Press writer Tom Verdin in Sacramento, Calif. contributed to this report.

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