New tax plan will test voters' appetite for rate hike
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Denver leaders want voters to increase local taxes this fall, pushing the city's overall rate past 9%, and testing taxpayers at a time when consumer spending has slowed.
The big picture: Denver Mayor Mike Johnston wants a 0.5% sales tax raise to generate $100 million annually to meet the city's affordable housing needs. Meanwhile, Denver Health, the city's safety net hospital, seeks a 0.34% hike to raise $70 million annually to cover operating costs.
The intrigue: Denver voters don't often reject proposed tax increases, something economist Chris Stiffler of the left-leaning Colorado Fiscal Institute said might be due to how inconspicuous the additional money can be when added to something like a grocery bill.
- Unlike property or income taxes, Stiffler said sales taxes often go unnoticed by consumers: "Sales tax is a drip that tends to add up."
- This may explain why Denver voters have approved seven tax hikes since 2014, according to the right-leaning Common Sense Institute.
By the numbers: The two latest measures would raise the city's overall rate from 8.81% to 9.65%, which includes state and regional taxes.
- It's a rate Johnston said keeps Denver "competitive" in the region. He added it's not the highest in the state, which is true; Winter Park's 11.2% rate tops the state.
Yes, but: It would still push Denver's rate among the highest in Colorado.
Between the lines: Sales taxes can be regressive, Stiffler says, because lower-income earners pay a significant chunk of their income toward taxes.
- Johnston said his plan would mean the average family would spend about $2 more a week, and would exempt spending on food, fuel, medical supplies and personal hygiene products.
Context: A new poll shows a plurality of Denver voters (35%) believe city government taxes are way too high, but the majority (56%) say they're acceptable or about right.
- Another 8% consider them lower than expected.
What they're saying: "It would be safe to say that there probably is additional concern about taxes ... but … most [Denver] voters believe that their tax burden is acceptable," Kevin Ingham of polling firm Aspect Strategies said.
- Stiffler says sales tax increases tend to "poll better" than potential increases to income or property taxes.
Follow the money: Sales and use tax are the city's most crucial revenue stream, comprising over half of its $1.633 billion general fund last year, per Denver's finance department.
- Roughly 75% of the city's general fund comes from taxes.
Friction point: The city anticipates "softening" tax revenue, meaning money generated from taxes isn't growing as much as previous years, finance department spokesperson Laura Swartz tells us.
- The department projects a 1% jump from 2024 to 2025, slightly less than the 1.6% growth for the current year.
The bottom line: Johnston said his plan will help pay for an additional 44,000 housing units over the next 10 years.
- "We are doing this now because Denver can't afford to wait," Johnston said Monday.
What's next: Denver City Council this summer will formally consider whether to put Johnston's plan on the fall ballot.
- The council has not received a formal bill or proposed ballot language for the plan as of Wednesday.