Tax Analysts Blog

When Liberals Preach Fairness, Hold On to Your Wallet

Posted on Oct 16, 2013

In a few weeks, voters in Colorado will have a chance to reform one of the most significant tax limitations ever enacted. Amendment 66, designed to raise nearly a billion dollars a year for education, would end the state’s flat income tax structure. It would mandate a progressive income tax – higher rates on the rich – and use the extra money for the children. In other words, it is a chance to take money from the Scrooge-like robber barons and give it to the poor, angelic urchins living in the squalor of the streets. That’s how it’s being sold, at least.

Every organization that supports passage is asserting the measure’s fairness. Even back East in Washington, my friends at the Institute on Taxation and Economic Policy say it would make the system fairer. Many other folks also believe that replacing the flat income tax rate with a progressive system would be fairer. The fairness would result because the rich would be paying more.

Just who will be treated more fairly if the measure passes? Not the working poor – that’s for sure. The amendment would raise taxes not only on the rich, but on everyone. The current flat rate of 4.63 percent will go up for all people. It would rise to 5 percent if you make up to $75,000 and 5.9 percent if you make more than that. Yes, poor workers will pay more than they do now!

The only winners are the teachers’ unions and friends of politicians who sell stuff to school districts. I’m not sure how raising the tax burden on someone who earns $30,000 a year can ever be characterized as fair. What’s fair about asking the auto mechanic or waitress to pay more so that the governor’s supporters are enriched?

Two sets of people are supporting the amendment. First, just about every state and local organization dependent on government funding is supporting it. The teachers’ unions have given over $1 million to see it passed. Then there are liberal political leaders who live for government expansion and redistribution. In Colorado, those politicians are supported by a small coalition of bored liberal billionaires who have also donated millions of dollars to the cause. I am sure those hardworking, middle-class wage earners who will pay more are very happy that the bored liberal billionaires are looking out for them.

Sure, the rich will pay more (and relatively much more). But supporters of the measure are asking the working poor to pay as well. There is nothing fair or just or noble about that. And Coloradans have rejected similar proposals. Indeed, in 2011 voters overwhelmingly rejected Proposition 103, which would have raised $3 billion for the schools. The working stiffs in Colorado can only hope for a repeat.

Read Comments (5)

bubba shawnOct 16, 2013

David,

Those same arguments advocating a progressive income tax worked 100 years ago.

Socialistic class warfare is cemented into American political DNA.

emsig beobachterOct 16, 2013

There you go again with the unions. Do you object so strenuously when
billionaires attempt to influence political outcomes by dumping money into
political frays? (Bubba: class warfare is cemented into American political DNA.
In fact, it's cemented into almost all political DNA).

David:

Are you objecting to the idea that some residents of CO want more resources
devoted to primary and secondary education and are using the ballot to pry
money from the woikin' stiffs of CO to pay for part of the cost? Are you
objecting to changing the income tax system from a degressive tax system (flat
rate, progressive tax) to a system with explicit progression in marginal rates?
You suggest that waitresses and auto mechanics will pay more tax (they will) in
order to benefit the governor. I assume that the mechanics and waitresses
currently have no children, nor will they ever have children so that their
families will never derive any benefit from the increased expenditures on
education.

Would you object to teachers' unions if schools were privatized and the parents
given vouchers to pay for all or most of their childrens' education? This is
great question in the economics of public choice. Would you object so
vehemently if the kids were sent out to shovel snow to earn money to pay the
increase in school expenditures?

David BrunoriOct 16, 2013

Emsig, You are right, I should not be picking on teachers. I actually respect
and admire teachers very much. My point was much narrower though. Proponents of
the measure are touting its fairness. I just don't see how a tax increse on
lower income folks is fair. The education industry wants more money. This
measure will get it for them - it does not have a lot to do with fairness. I do
like the snow shoveling idea though.

emsig beobachterOct 17, 2013

ACH, yes -- fairness. "Fair" is a concept like truth, beauty, and justice --
they are in the eye of the beholder. Few people, least of all attorneys and
economists, should talk about fairness. Equity, efficiency, yes -- fairness --
NO!

Let us assume, for the sake of argument, that greater resources in CO should be
devoted to public education. I propose that part of the funding for the
increase in revenues should come from user charges -- charges for textbooks,
consumable supplies such as paper, chalk (I date myself), registration fees,
etc. The proposed increase in income taxes could be used to provided sliding
subsidies to families depending on family income and number of children in
public schools to cover their user charges. We don't want to price the lower
income families out of the education market. Further, let us assume that the
increased school spending makes CO a more desirable place for businesses
because they will have a better educated work force; and, a more desirable
place to live for families with school-age children. Property values in CO
should rise above trend. Part of the increased property values should be taxed
by the state. Thus, the increase in school funding is financed partly by
increases in user fees, income taxes, and increase in property taxes. Also, as
I noted previously, there is no need to raise the explicit marginal rates. A
slight increase in the flat rate accompanied by a slight reduction in standard
deductions and personal exemptions will retain the progressivity of the income
tax. The fact that lower middle income and middle income will pay for a part of
the increased expenditures on education -- which will probably trickle down in
the form of slightly better cognitive skills for their kids which will help
them later in life -- is not fair, but it is efficient. People should recognize
that government services are not free and the better off should be expected to
pay the entire cost. (I myself am a "Blue Dog" Democrat -- alas, a dying
breed.)

A truly efficient scheme would be to take the kids into a form of indentured
servitude after they end their academic careers -- somewhat like the current
student loan program. At least they'd be shoveling snow as adults. The state of
CO could impose a tax on the tips received by barristas to compensate for the
costs of better education for CO children. I'll go now as my meds are wearing
off as you can probably tell by my post.

David BrunoriOct 17, 2013

Emsig, that was an excellent comment -- as usual. Personally, I think Colorado
made a big mistake in limiting the property tax. Personally, I think the
property tax should be used to finance k-12 education in general. And property
poor districts should be given state aid (from a broad base tax) to equalize
the effort. But the property tax demise is a discussion for another day.

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