Diary

No Legitimate Reason to Vote “Yes” on Poorly-Timed, Regressive Income Tax Ballot Measure

AP Photo/David Zalubowski

Eleven members of the Denver City Council, wise sages all, have decided the appropriate time to place a sales tax hike on the ballot is during an international pandemic that has caused serious economic dislocation.

But Ballot Measure 2A is not just any ordinary sales tax hike, it is a righteous sales tax hike, with revenue raised “to be used to fund programs to reduce carbon pollution and adapt to climate change.”

If passed, Measure 2A would raise the county’s sales tax from 8.31 percent to 8.56 percent. The Council estimates this increase would take an estimated $40.8 million from county residents in Fiscal Year 2021 alone. These monies would be used to fund such amorphous schemes as “increased investments in solar power,” “neighborhood-based environment and climate justice programs,” “adaptation and resiliency programs,” and “programs and services that provide affordable, clean, safe and reliable transportation choices like walking, biking, transit, electric vehicles, and neighborhood-scale transit.”

Other than providing county bureaucrats with more money to maneuver around in slush funds to benefit their friends in politically-connected environmental and “social justice” groups, there are two big problems this tax presents.

The first problem is that sales taxes are inherently regressive, meaning they fall disproportionally on those with low incomes. This tax is no different, and will make all goods more expensive for poorer Denverites to purchase. During an economic boom time, you could maybe look the other way at a tax like this. But passing one during a pandemic, at a time when Gov. Jared Polis has just announced the state will spend $168 million providing a $375 benefit payment to over 400,000 unemployed Coloradans? That just seems unnecessarily cruel.

Yet even before the COVID pandemic, nearly one in every six Denver County residents were living in poverty, in roughly 50,000 households. Any increase in costs for these people could possibly mean the difference between keeping the lights on in the house or living in darkness, between keeping the heat on or living in dangerous cold, between paying the rent or facing eviction.

If wealthier Denverites want more bike lanes and larger subsidies for the purchase of a Tesla or solar panels for their house, they should pay for them themselves instead of enacting another upper-middle-class welfare program funded by their less well-to-do neighbors, which is what Measure 2A would be in practice.

Denver’s sales tax burden is already high enough. A report from the left-leaning Bell Policy Center released this August notes that, across Colorado, “at both the municipal level and the county level…property taxes have decreased as a share of overall taxation. In its place, sales taxes have increased steadily. Whether by choice or necessity, sales taxes have become a great proportion of local government taxation.” Colorado communities rely on sales taxes for revenue at nearly double the rate as the national average, and the larger the population of the county, the more likely they are to rely on sales taxes. This regressivity “builds upon and exacerbates long-standing racial inequality,” the report notes. “An overreliance on sales tax has a cumulative negative effect on Coloradans of color, as they are often less likely to own homes and spend more of their income on items affected by sales taxes.”

The second problem with Measure 2A is that it will be completely ineffectual in combating global climate change and is entirely unnecessary. According to the Environmental Protection Agency, carbon dioxide emissions in Colorado from fossil fuel consumption peaked at 100.25 million metric tons in 2007. Since 2010, while crude oil production in the state quadrupled and natural gas production increased by 26 percent, carbon dioxide emissions have decreased by almost 10 percent to 90.40 million metric tons. (Thanks fracking!) Further, Colorado’s emissions only make up a little over 0.2 percent of the global total. Getting rid of these emissions in their entirety would have no measurable impact on climate change.

Voting “yes” on 2A would be nothing more than a performative action the consequences of which will do literally nothing to combat climate change, but will do tangible harm to the lives of less fortunate Denverites. Air quality in Colorado and the rest of the United States has reached a point where new taxes seeking to improve it are no longer necessary. Still, if county residents are so gung-ho about burning money to “combat” climate change, which they shouldn’t be, they should do so through a mechanism that isn’t so disproportionally burdensome to the poor, such as an income or property tax increase instead.

Tim Benson ([email protected]) is a policy analyst with The Heartland Institute, a free-market think tank headquartered in Arlington Heights, Illinois.