Tomorrow, Colorado voters will decide on Amendment 66, which would move Colorado from one of the eight states with a single-rate individual income taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. to one that has a graduated rate structure. Currently, the state’s income tax rate is 4.63 percent on all income levels. Amendment 66 would increase the tax rate on income less than $75,000 to 5.0 percent, while taxing income above $75,000 at 5.9 percent.
Coloradans of all incomes would see a rate increase. Those with taxable incomeTaxable income is the amount of income subject to tax, after deductions and exemptions. For both individuals and corporations, taxable income differs from—and is less than—gross income. below $75,000 would see an 8 percent increase in rate. Coloradoans with more than $75,000 in taxable income would see a 27 percent increase in their top rate.
An 8 percent increase may seem insignificant, but it leaves less money for households to purchase essential goods and services—especially lower-income families. This is best demonstrated by a few examples, which we outlined in our recent report on the amendment:
- Proponents of Amendment 66 argue that a person making $30,000 per year will pay “about $4 per month” more in taxes, or the cost of “an ice cream cone.” At this income level, the additional $4 a month in taxes from Amendment 66 is better characterized as one less meal, not one less leisure good (such as an ice cream cone).
- Similarly, a taxpayer earning $50,000 annually will pay an additional $9 per month, which supporters equate to “a burrito with extra guac [sic].” In truth, this amounts to an additional $108 per year, on average, or roughly the cost of heating a typical Colorado home for one month during the winter.
- According to the IRS, over 37 percent of Coloradans have an adjusted gross income of less than $25,000. A family earning this amount would pay an estimated $31.08 in additional taxes, which is equivalent to the average cost of feeding a one-year-old child a healthy diet for one week.
- Finally, a two-earner, two-child household, with each parent earning $57,000, would see an estimated annual tax increase of $393, or roughly the cost of the employee portion of one month of family health insurance coverage. Similarly, a person earning $40,000 would see an approximate tax increase of $82 per year, or roughly the cost of a worker’s portion of one month of employer-provided health insurance.
Higher individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. es would further reduce the take-home pay of low- and middle-income Coloradans, adding a second round of austerity to already cash-strapped households.
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