OUR VIEW: Prop 103 means fewer jobs, less income (poll)

It is common sense. Raising taxes on a stagnant or shrinking economy results only in higher unemployment, a smaller tax base, reduced household incomes, more foreclosures and more poverty. That is exactly what we will get in the unlikely event voters approve Proposition 103, a tax increase that the Colorado Legislative Council estimates will cost $2.9 billion. That’s bad enough, but it’s not the full cost. Two leading economists just completed independent research on the proposal and determined the total cost, including the loss in personal income, could be up to $6 billion. The cost to each Colorado household, from 2012-2016, would be up to $2,711. They estimate a statewide loss of jobs at between 7,400 and 11,600.

It’s not hard to understand why. When government takes money from the private sector and spends it, the private sector has less money. It has less to use for production and trade and therefore less money to pay employees or to invest in endeavors that require new employees. A reasonable tax increase works on an expanding economy — one that can afford more government spending — but not on a struggling economy. When new taxes are imposed on a troubled economy, government only exacerbates the structural deficit. That means it hurts the private sector and government simultaneously, by stifling economic growth.

The analysis was sponsored by the Independence Institute, a free-market public policy organization in Golden. Research and analysis were conducted by Barry Poulson, professor emeritus of economics at the University of Colorado-Boulder, and John Merrifield, professor of economics at the University of Texas.

“Prop 103 will move us toward a path similar to the one taken in California, with higher tax burdens, lower economic growth, and reduced job opportunities for Colorado citizens,” the report states.

The economists used regression analysis of the effects of increasing the marginal tax rate in one state while keeping it the same in competing states. They found that every 1 percent increase in a state’s marginal tax rate, relative to the marginal rate for the nation as a whole, reduces the state’s growth rate by up to 0.374 percent. To analyze the effects of the proposed tax hike against known economic data, the economists studied what it would have done to Colorado during the fiscal years 2007-2011, a time span comparable to the four years the Prop 103 taxes would be in effect.

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“The cumulative reduction in personal income over the period as a whole would have been between $2.0 billion and $3.2 billion,” the report states. Personal incomes would have decreased statewide by $200 to $300 million each year the tax was in place, and the annual loss in personal income would have reached upwards of $1 billion by 2011.

A vote for Prop 103 is a vote to make Colorado’s economy even weaker. It is a vote to worsen the state budget, which relies on a strong economy to fund government education, transportation and other important needs. Imposing new costs on a struggling economy is no different than imposing new costs on a household that’s struggling to get by on fixed or dwindling income. It just will not work.

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