Despite being awash with funds from improved revenues and billions of dollars in federal pandemic aid to the state, Democrat legislators have chosen to fund their transportation priorities with new fees that disproportionately impact the poorest Coloradans.
The $5.3 billion transportation bill (SB 21-260) working its way through the legislature this week will create approximately $3.8 billion in new fees Coloradans will pay on common purchases such as gas, food delivery, ridesharing, rental cars, and more.
Throwing ‘tax fairness’ out the window
Putting aside which particular priorities the bill funds and the legal gymnastics performed to get around voter approval requirements, the bill’s funding mechanisms contradict past positions taken by the bill sponsors and other Democrats on the question of tax fairness.
Democrat legislators and Leftist political organizations frequently bemoan regressive taxation and call for a more progressive tax code. Yet this bill relies on highly regressive taxes—erroneously called “fees” in the bill—for the lion’s share of its funding.
Senate Majority Leader Steve Fenberg (D-Boulder), a prime sponsor of the bill, tweeted last summer that the state needs to make its tax code fairer, advocating for abolition of the state’s flat tax in favor of a graduated progressive income tax.
The bill’s other prime senate sponsor, Senator Faith Winter (D-Adams), objected to the regressive nature of last year’s tax increase on cigarettes, tobacco, and nicotine, “as poor people and people of color are disproportionately likely to smoke,” the Denver Post reported.
Notably, her concerns over increasing taxes on the poor were assuaged and she ultimately supported the highly regressive new taxes after other members of her party agreed to her amendment directing some of the new tax revenue to her pet project of the day, the state’s overfunded housing programs.
As with the tobacco and nicotine tax, fees in the transportation bill also unduly impact lower-income families, increasing the regressive nature of state taxes. The largest single source of revenue comes from a gas tax increase thinly veiled as a “road usage fee” by the bill authors.
The new fee will cost families making under $10 thousand per year ten times more than families making over $500,000, relative to total income, just as the current gas tax does.
When fully implemented, the fee will increase the amount the average Colorado household pays in state gas taxes and fees to $267 per year, up from $196, based on the latest available data. That figure does not include the federal gas tax calculated on top of the state’s tax.
During the Senate Finance Committee hearing on the bill, Senator Paul Lundeen (R-Monument) asked the bill sponsors, “Do we want to [pay for the bill] with a tax that is essentially regressive in nature?”
Republicans have offered multiple proposals to fund essential infrastructure projects without creating these regressive fees. Every proposal has been blocked by Democrats, including a 2018 bill to provide funding through state-issued bonds. Democrat lawmakers also rejected an amendment to SB 260, which would have replaced the need for massive new fees by deploying 2 billion in federal stimulus dollars to address transportation and infrastructure.
Democrats defend regressive taxation
One Democrat witness, former Boulder County Commissioner Elise Jones, explained in response to Sen. Lundeen’s question that the bill helps the poor by subsidizing alternative modes of transportation like the failing Regional Transportation District and “more affordable non-car options.” She does not attempt to reconcile the irony of taxing low earners to fund electric vehicles subsidies, which overwhelmingly benefit higher earners.
The witness also pointed to climate change: “I would also note that low-income communities are disproportionately impacted by transportation emissions.” This presumably justifies imposing new fees on these same low-income communities—for their own good, of course.
Another witness, Adams County Commissioner Steve O’Dorisio, declined to address the question of tax fairness entirely, instead clamoring to justify how struggling families stand to benefit from government spending their money for them.
It appears supporters of this bill have adopted a “carrot-and-stick” approach where fees make it more difficult for low-income Coloradans to own and fuel motor vehicles, while subsidies encourage them to use public and alternate transit instead.
In spite of the apparent confidence from Democrats and their witnesses that this approach—including the regressive fees—actually helps the poor, they have bent over backwards to ensure that those very same Coloradans have no say in the matter. The authors of the bill carefully crafted it to evade voter-approval requirements in both Proposition 117 and the Taxpayer’s Bill of rights (TABOR).
In response to Senator Lundeen’s question about the regressive nature of the road usage fee during the Senate Finance hearing, Committee Chair Brittany Pettersen (D-Jefferson) unwittingly showed her hand on the matter of tax fairness, saying, “There are better ways to fund things,” and “I also support a progressive tax.”
Here she admits that creating new regressive taxes is not the best way to do things. She, like most of her colleagues, prefer progressive taxes. Yet, they still support the regressive fees, which fund this bill. The obvious implication is that if she has the choice between working judiciously with existing tax revenue or expanding government using regressive new taxes, she prefers the latter.
In fact, efforts from the Left to create a more equitable tax code always call for an increase in net government revenues. Never has a Democrat “tax fairness” proposal sought to rectify the regressive nature of the tax code simply by reducing taxes on low earners. On the contrary, when faced with the choice they have consistently chosen more revenues at the expense of the state’s poorest residents rather than giving up revenues to make the code more progressive.
Senate Bill 21-260 presents legislators with this same dichotomy, and each will have to ask themselves: Am I comfortable with funding the state’s transportation priorities on the backs of Colorado’s poorest residents?
Ben Murrey is fiscal policy director at the Independence Institute, a free market think tank in Denver.
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