A Quick Look at Proposition 101 and Amendments 60 and 61

I was at a meeting of the local Republican Party a couple of weeks ago where a city employee handed out sheets urging us to vote against Proposition 101, Amendment 60 and Amendment 61 in November. The flier was created using information from the Bell Policy Center. That surprised me some as the the Bell Policy Center is a progressive think tank which has been actively working to repeal or cripple the Taxpayer's Bill of Rights (TABOR) encoded in Colorado's Constitution. Then, a few days ago, while attending meeting greets with Scott McInnis and John Hickenlooper, both candidates stated their opposition to those ballot initiatives. I hadn't heard much about any of them before and I was curious about what was in those bills that would put McInnis and Hickenlooper on the same side. So, being the dutiful citizen that I am, I decided to hunt up the text of the initiatives and see for myself.

Please keep in mind as you read this that I am not a lawyer or an economist. Feel free to add your thoughts on these ballot initiatives in the comments. Also, keep in mind that both sides will try to treat these a one bill and urge the pass or fail of all of them at once.

Proposition 101

Prop 101 does a couple of things. First, over four years, it drops the vehicle ownership taxes to $2 for new cars and $1 existing cars and limits vehicle registration to $10. It also eliminates sales tax on car rentals and, over four years, sales tax on the first $10,000 of vehicle purchases.

Second, it sets the income tax rate to 4.5 percent and lowers it by 0.1 percent every year that tax revenues increase by six percent or more until the rate is 3.5 percent. If tax revenues don't increase by at least six percent, the cuts don't happen. It's likely that we wouldn't see the growth needed to drop the rate to 4.4 percent for a couple of years; longer if ObamaCare doesn't get repealed.

Third, all city, county and state taxes on phone, cable, Internet and related services are repealed with the exception of 911 fees. Those taxes, or others, could be added back by a vote of the people in accordance with TABOR.

This is, on the face, the simplest of the three to understand. You need to keep in mind that changing any of the taxes or fees laid out in Prop 101 will need to go to the voters because of TABOR. What makes this interesting is that most counties use the tax revenue from vehicle ownership taxes to fund other things such as schools. The Bell Policy center has put together their evaluations of how this will effect each county.

What I found most interesting was how many non-vehicle related things were funded by the vehicle ownership tax. For example, Alamosa County seems to be hiding taxes for all sorts of things in the vehicle ownership tax. The biggest chuck, 45.2 percent, goes to Alamosa County Schools while 12.1 percent go to things like mosquito control. I'm curious why those taxes got shoved in the vehicle ownership tax rather than as a property tax.

Remember too, while looking at BPC's charts, that the ownership taxes phase in over four years rather than all at once as their charts imply. Also, nothing in Proposition 101 prevents counties from asking their residents to increase their property or sales taxes to make up for the taxes that are cut here.

Proposition 101

Amendment 60

Before I dig into Amendment 60, I'd like to point at the Constitution of the State of Colorado. It may come in handy as you cross reference some of the changes Amendments 60 and 61 make. TABOR is Article X, Section 20.

Amendment 60 makes a few different changes. First, it allows Colorado citizens who own property in a tax district, i.e. cities, counties, etc., to vote on property tax changes in that district. It also ensures that those elections will happen in November.

The stated reason for ensuring the November date is to increase voter turnout. The drawback is that is doesn't allow cities the flexibility to get a tax change approved earlier in the year to get projects done. As an example, the City of Alamosa has a dike along the Rio Grande that needs to be repaired to bring into compliance with the updated codes. The city could have gotten a tax hike approved in April to pay for the repairs and get the work done before the Spring runoff.

Second, Amendment 60 ensures that only the property tax and associated late charges are listed on a person's tax bill. Apparently, some counties like to put things like parking ticket fees on property tax bills.

Third, government run companies and authorities must pay property taxes. This puts them on more equal footing with their private competitors. Also, government Enterprises and unelected boards may not raise taxes.

That was the easy stuff. Now comes the changes to property taxes themselves. Here's were a lot of the controversy is focused. First, all new property taxes automatically end ten years from passage. Extensions are considered tax increases under TABOR and must be approved by the voters.

An interesting fact about tax increases in Colorado is that they must include the dollar amount that will be collected in the title of the bill. Any revenue collected above that amount must be refunded in the next fiscal year. Amendment 60 says that law allowing tax district to keep that additional money expires in four years. Extensions must be approved by voters.

Third, school related property taxes are cut in half. The state is required to make up the difference. In theory, this fixes the issue that the Labato law suit complains about. Labato is suing the state under the "thorough and uniform" schools clause of the state Constitution because poor and rural areas of the state cannot raise the same amount of money per student as the urban areas of the state. This seems to ensure a redistribution of wealth for school districts that is part of the original state Constitution.

This is complicated by Proposition 101 because it cuts the amount of money collected from the income tax. Colorado can't levy property taxes (cities and counties can) so it is dependent upon income and sales tax revenue. I'll all for cutting taxes but I have to question the wisdom of doing that at the same time a lot of new spending is added.

Amendment 60

Amendment 61

Amendment 61 restricts how governments can go into debt. According to TABOR, voters are supposed to approve all new debt but governments have been getting around it by calling debt by lots of different names. It also restricts all new debt to ten years.

Generally, I can agree with that. There is at least one problematic case that I can see (because it's happening outside my office window). Adams State College has begun a project to build a new dorm and renovate the existing dorms and a couple of the academic buildings. The college bonded against an increase in student fees which was approved by the students. ASC is selling 30 year bonds to pay for the construction. The College doesn't exactly have a tax district to ask for a vote and it certainly wouldn't be able to afford the construction without the loan. Depending on how colleges are classified under Amendment 61, it might prevent any college from being able to do capital improvements.

Amendment 61

Take a look for yourself at these ballot initiatives and decide for yourself.