University of Denver

June 20, 2005Colorado, one state or many?

By Jerry Groswold

When the Colorado Economic Futures Panel set about its task of understanding the fiscal structure of the state of Colorado, we assumed that we were looking at one state with a relatively consistent taxing and spending structure from border to border. We have now learned that we are looking at an unbelievable array of taxing entities with far from consistent taxing and spending philosophies or practices. There are those who argue that we have at least 64 states and others who would claim that we have over 2500!

How can this be? I would suggest that you find your Real Estate Property Tax Notice for 2004 due in 2005. Locate the listing of the taxing authorities, and that will tell you the taxes you paid on your real property for someone to provide you with some service. If you are a renter, ask your landlord for the list of taxing authorities or call the Assessor in your county and get the list. Realize that the cost of these taxes is included in your rent so you are the ultimate taxpayer paying for those services.

I live in a rural area of Northwestern Colorado and I pay taxes to two water conservancy districts, a library district, a metropolitan recreation district, a fire district, a school district, a water and sanitation district and the county — which includes a specific mill levy for emergency medical service! In addition, I pay state income tax, state and local sales tax in several different jurisdictions — each at a different rate ranging from 2.5% to 9.3%, license plate fees, and a myriad of other taxes and fees including special taxes and fees for specific items like tobacco and booze that I might purchase or services that I may receive. I live in one state planning region, a different Department of Transportation district, yet a different Judicial District and even a different Council of Governments. Even worse, I live on the Western Slope and thus have a different point of view from some of the folks with whom I may share ownership in or indebtedness to all of these various districts and taxing entities.

And yet we all have considered ourselves to be in one state with a single taxing and spending philosophy?

Nothing could be further from the truth.

As an example, I am paying for K through 12 education even though my children graduated from the local public schools years ago. I don’t mind paying for the cost of the schools because I am a strong believer in education for all of our children, but I am amazed at the different and not very obvious ways that I pay. It is quite obvious from my tax bill that I pay for education through the real property taxes that I pay to the school district. But I also support this worthwhile effort with the money I pay to the state in the form of income tax and any other taxes that go to the State General Fund, which are then appropriated or earmarked for education.

But I do not know specifically how much I pay to support education! I do not know how to determine exactly the amount of my support! And the amount that I pay to support education in my school district is different from the amount paid by people in comparable situations in other counties in this state! And there is no logical way to justify those differences! And all of this does not include the amounts that are spent on higher education in this state! And we still think we live in one state? And we think we have one taxing and spending philosophy?

If not, then what have we learned?

We certainly have learned that we don’t live in one state – at least from a taxing and spending point of view.

And we have learned that our fiscal structure is overly complex and hopelessly intertwined in over 2500 taxing and spending authorities that take money from our pockets every day to provide us with services of many different kinds.

And we have learned that constitutional constraints on particular pieces of this puzzle don’t always work the way that the voters believed they would when they voted for them.

And we have learned that fiscal constraints and earmarking requirements in our constitution have a very negative impact on representative government – to such an extent that we have eliminated the ability of most elected officials to make reasoned and intelligent decisions on the fiscal matters that they were elected to decide. On top of tying their hands with constraints, we have also placed term limits on them.

And we have learned that we get unintended consequences from the band aid approach that has been used to address the fiscal perfect storm we have found ourselves in for the last few years, often times with much more severe negative results than the problem we sought originally to solve.

And we have learned that, while temporary fixes may get us through the short term financial difficulties we face, a more permanent and reasoned solution must be found for the State of Colorado to function as one state with the quality of life we all seek for ourselves and our children in the competitive environment in which we now live and work.

Unfortunately, we have not learned what that solution might be – at least not yet.

Jerry Groswold, a member of the Colorado Economic Futures Panel, is a native of Denver and a consultant to mountain ski resorts.