Jan 11, 2024 - Politics

Gov. Jared Polis calls for major tax cuts, angering Democratic allies

 Gov. Jared Polis delivers the 2024 State of the State address to a joint session of the Legislature at the State Capitol on Thursday. Photo: Hyoung Chang/The Denver Post

Gov. Jared Polis delivering his 2024 State of the State address to a joint session of the Legislature at the Capitol yesterday. Photo: Hyoung Chang/The Denver Post via Getty Images

Colorado Gov. Jared Polis left his Democratic Party colleagues fuming Thursday after a passionate β€” and contradictory β€” demand for an income tax cut that will most benefit the wealthy.

State of play: He punctuated his State of the State address before a joint legislative session by declaring that "taxes are simply too high," as evidenced by the state's surplus, and calling for cuts to income, property and sales taxes.

  • "We ignore that signal at our own peril," he added.

Why it matters: The remarks represent the second-term governor's most ardent push yet for a lower income tax, and he didn't mince words as he openly challenged the Democratic majority to cede its ground.

The intrigue: His proposal to cut taxes is antithetical to the rest of his speech, in which he called for more education spending, massive investments in transit and other new programs to address crime and boost job training.

Reality check: If the state cuts income taxes for the third time in four years below the current 4.4% rate, it would leave little money for all his policy priorities and risk a budget deficit in tough economic times.

  • "I'm befuddled. This is completely inconsistent with everything else in the speech," said Scott Wasserman at Bell Policy Center, a liberal fiscal think tank.
  • "A flat income tax cut will end up benefiting the wealthy … and undercutting the services that low- and middle-income people rely on."

State of play: Polis aligns with conservatives when it comes to fiscal policy and supports eliminating the state income tax, the state's main revenue source for discretionary spending.

  • He subscribes to trickle-down economic theory, saying in his speech that a lower income tax will boost the state's overall economy, and aligns himself closely with his friend, former President Ronald Reagan economist Art Laffer, who is a pariah to liberals.
  • He recently outlined an overhaul of the Taxpayer's Bill of Rights to focus on tax rates, rather than the current cap on revenue.

Of note: Polis, a millionaire former tech entrepreneur, used financial arrangements and nonprofit donations to avoid paying federal income taxes from 2013 to 2015, a 2021 trove of leaked tax documents showed. He also didn't pay them between 2001 and 2005.

The other side: His traditional Democratic allies just as fervently object to his proposal, suggesting the flat income tax cut is a nonstarter as they discuss a more progressive, graduated tax system that would help lower-income residents and increase taxes on the richest.

  • Democrats plan to introduce legislation to make TABOR refunds permanently equal in size, which would benefit lower-income brackets, even as Polis argues that those who pay the most in taxes should get the largest tax refunds.

What they're saying: "We cannot have our cake and eat it too," House Speaker Pro Tem Chris deGruy Kennedy told us, dismissing the governor's income tax plan.

  • State Rep. Emily Sirota (D-Denver) called the governor's proposal "disappointing, at best. She added: "What Coloradans deserve is an honest discussion about obligations of the state to its people, infrastructure and environment, and how we're unable to meet those obligations under the constraints of TABOR."

What to watch: Just as Polis is pushing tax cuts, he's poised to ask voters for a tax hike on the 2024 ballot to pay for a passenger rail line from Pueblo north to Fort Collins, a pet project.

  • A legislative tax cut package this session could help alleviate concerns about a train tax to come.
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