News outlets in Colorado reported last week that researchers at the University of Denver recommended tax hikes to fill yawning future budget gaps .
“„[O]n the individual income tax, of the 10 states in the intermountain west, our proposed rates would fall in the middle of the graduated rates of those states. Of the 10 states, 9 have an income tax (Wyoming, with its big revenue producing severance tax, has no income tax). Our rates would compare favorably to ID, KS, MT, and NE. AZ and NM have lower top rates, and UT has a flat rate of 5%. In all cases, the brackets are substantially lower than the ones we propose, so more of their taxpayers would pay the top rate (in all cases except for AZ, nearly all of their taxpayers pay the rate in the top bracket). What all of this means is that we need to compare “effective tax rates” in these states with the effective rate that would result from our option of a 6.1% top rate. Another way to do the comparison would be to compare the per capita income tax burden among these states. Due to the lag in reporting, we would need to simulate our proposal for 2008 to do that. My gut tells me that once these comparisons are done, we will compare favorably to the other states except for WY on the income tax.
“„On the sales tax rate, at 2.9% we have the lowest state rate by far of the 8 other states levying a sales tax (MT has no sales tax). Of our neighbors, WY has the lowest rate at 4%. The rest of the intermountain west is between 4.75% (UT) and 6.5% (NV). Our proposed base would most likely be more broad than many of these states, but again, due to our low rate, the per capita burden would unquestionably be competetive.
“„On the property tax, the per capita burdens would be favorable over all. The distortion in our tax system between residential and non residential property, and our business personal property tax already make Colorado less competetive to certain kinds of businesses. At the end of our summary we noted some areas that need to be studied in depth. The property tax is one of them. It is a real mess. In the end, the impact of a uniform levy for schools depends on what your business is and where you are within the state.