April 15, the traditional deadline for filing federal and state taxes, is a good day to rememember that Colorado has the lowest state tax burden in the nation, according to a Jan. 24 report by the nonpartisan Colorado Legislative Council.
In the 2003-04 fiscal year, Coloradans paid an average of just $44.57 in state taxes for each $1,000 of personal income – 30 percent below the national average of $63.70. It was the second straight year that Colorado had the nation’s lowest state tax rate.
Colorado taxes aren’t just the nation’s lowest, they’re getting even lower, having declined by $7.84 per $1,000 of personal income over the past three years. Legislative Council economist Tom Dunn attributes much of that decline to the recession, which sharply reduced such traditional state income tax sources as capital gains.
But the recession was nationwide, and average state tax burden across the country decreased by just $2.94 during the same three years. Dunn notes that at least 30 states offset part of their revenue losses from the recession with tax increases. The 1992 Taxpayer’s Bill of Rights prohibits such tax increases in Colorado without a vote of the people.
Colorado’s ultra-low state taxes are somewhat offset by local taxes, which rank as the 12th highest in the nation, because Colorado’s tradition of local control means we delegate to cities, counties and special districts many tasks that other states handle in the state budget.
Local revenue sources such as sales taxes and property taxes accounted for 50.2 percent of combined state and local taxes in Colorado, compared to a national average of just 40.9 percent. But even after averaging those local levies in with Colorado’s rock-bottom state taxes, the state is a bargain for taxpayers – ranking 46th in combined state and local tax collections of $91.02 per $1,000 in personal income, 13 percent below the national average of $104.11.
It’s nice to have low taxes, especially on a day like today, but the recession sent revenues too low to sustain essential state services, and the state’s elected officials have been hamstrung by TABOR’s notorious ratchet effect that hinders Colorado’s fiscal recovery.
Among the programs especially hard hit have been higher education and the state’s already enfeebled highway fund. That’s why Gov. Bill Owens and a bipartisan coalition of legislative leaders have crafted a plan to reduce – though not eliminate – the future tax cuts that would be automatically generated by TABOR.
Tax cuts already engineered by Owens and the legislature will have slashed Colorado taxes by a total of $6.3 billion between 1998 and 2010, even if the Colorado Economic Recovery Act is approved by voters this fall. The analysis of Colorado’s state tax burden should buck all of us up on April 15, of all days.
