Thanks to the Taxpayer’s Bill of Rights, commonly known as “TABOR,” Coloradans will receive nearly $4 billion in excess revenue refunded from the state this year. That’s where those $750 checks for individuals and $1,500 for couples came from over the summer. On the ballot this year, Proposition 123 is asking voters to give up their refunds, at least in part.
If adopted by voters, the measure would reduce TABOR refunds by about $86 per person, based on information from the state voter booklet or “Blue Book.”
The measure dedicates up to 0.1% of income tax revenue to affordable housing programs administered by state bureaucracies. For years in which the state has a TABOR surplus, that would reduce TABOR refunds by about $300 million. State economists currently project refunds for at least the next three years.
Even Democrats — who rarely refuse the opportunity to spend more of your money on new government programs — have been skeptical of the measure.
Democratic state Sen. Chris Hansen, of Denver, expressed concern that Proposition 123 could eat directly into the state’s ability to spend on other priorities.
“There’s no free lunch,” Hansen said referencing the measure. “K-12 and higher education (is) where the marginal dollar is in our state budget. So $1 less means $1 less for education.”
The statement proves a bit disingenuous, but the senator is right to say there is no such thing as a free lunch.
Proposition 123 will either reduce TABOR refunds or — and this is Hansen’s concern — force the state to cut spending if TABOR surpluses ever went away. In the latter case, legislators have the power to choose where those cuts would come from; they would not have to cut education.
Colorado’s Democratic governor, Jared Polis, has also noticeably failed to express support for 123.
Proponents of the housing measure say that the measure will not raise taxes. Though it would not increase tax rates, it would effectively raise taxes by reducing the amount of tax money you get back in TABOR refunds. It makes sense that Polis has not supported it, since he has supported a measure, Proposition 121, which does the opposite — lower income taxes for all Coloradans.
Those behind the measure also claim that it will “make Colorado affordable for generations of Coloradans.” Though it may, if successful, make housing more affordable for a few lucky Coloradans, it will likely make it less affordable for many struggling to buy a home. A simple lesson in economics explains this.
Housing prices have increased because the demand for housing has outpaced the supply of housing units. In a free market, high prices incentivize the creation of new supply, telling builders what to build and where to build it. As builders bring more housing units into our local communities, the increase in supply pushes prices back down, making housing more affordable. Simple enough.
But we do not have an entirely free market for housing in Colorado. Instead, government interventions create perverse incentives for builders, restricting supply and pushing up prices.
In other cases, strict building codes set a high minimum price on homes by making it uneconomical to build smaller “starter” homes.
Proposition 123 aims to increase the supply of housing, thus alleviating the problem; however, this only helps those chosen by government to benefit from housing programs. For everyone else struggling to afford a home, it will drive up prices even more — in addition to reducing their TABOR refunds.
Success for the program would mean the new funding incentivizes builders in the state to divert limited labor, materials and resources to government-backed housing programs. It will create a new pool of supply only available to certain buyers chosen by government. That means builders will put fewer resources into increasing the pool of housing units available to everyone else, making it more difficult for those who do not qualify for government housing programs to get an affordable home.
Rather than throwing more money and more government intervention at the problem, we would be better off getting government out of the way and removing regulatory red tape.
Fortunately, at a time when the country remains deeply divided, at least one thing brings Democrats and Republicans together: opposition to Proposition 123.
Ben Murrey is fiscal policy director at the Independence Institute, a free market think tank in Denver.
