State tax burden not as low as some think

Taxes. They’re always too high, never too low. Few of us appear to believe that we pay a fair share of taxes, or that the tax system is structured to reward hard work, penalize sloth and fund only the basic necessities of government.

In the famous dictum of Sen. Russell Long, D-Louisiana: “Don’t tax you, don’t tax me / Tax that fellow behind the tree!” Long also said that “a tax loophole is something that benefits the other guy. If it benefits you, it is tax reform.”

Are taxes in Colorado and in Colorado Springs too high, too low or just right? As another politician might have said, it depends upon the definition of low, high and taxes.

Let’s take a simple measure: the regional comparison of tax burden per $1,000 of personal income, as calculated by the Colorado state government. According to that metric, we’re second-lowest in the region, surpassed only by Oregon. Colorado state and local governments clip residents for a mere $93.44 per $1,000, easily beating low-tax states such as Wyoming and Nevada. Wyoming is the No. 1 money-grabber at $151.03.

That makes no sense. But as the study says, “Gaming taxes in Nevada and severance taxes in Wyoming are largely paid by nonresidents, but are accounted in the analysis as taxes against citizens in each of these states.”

Adjusting for these anomalies changes the picture. Nevada, at $62.69, moves into first place, and Wyoming, at slightly more than $100 settles comfortably into fourth.

From the adjusted analysis, there’s really not that much difference in state tax burdens. Of the 12 states surveyed, 11 are clustered between $93.94 (Oregon) and $122.61 (New Mexico). Yet there are substantial differences in each state’s taxes. “That fellow behind the tree” may be corporations, high-income individuals, commercial property owners or regular folks. Some states try not to give anyone a break. Others do without sales or income taxes.

Washington, Wyoming and Nevada don’t levy income taxes, but Washington and Wyoming have the highest sales tax burdens of the 12 states. Montana and Oregon have no sales taxes, but substantial state income taxes.

As well as measuring tax burden per $1,000 of personal income, it’s useful to look at sales and property tax rates and see how we compare.

Of the 45 states with a sales tax (five do not), Colorado’s is the lowest at 2.9 percent. That’s good, but at 4.49 percent, Colorado has the nation’s second-highest average local sales tax. The two combine to make Colorado’s rate No. 15 nationally. Tennessee leads the nation at 9.44 percent but has no income tax. Colorado Springs, at 7.63 percent, is slightly above the state average.

Colorado collected $1,601 per capita in property tax. California collects less ($1,450), but Wyoming ($2,633) and the District of Columbia ($3,106) collect much more. Local property tax rates vary drastically within Colorado, depending upon school districts, special districts and other tax-levying entities.

A typical Colorado Springs residential property tax bill includes levies for a school district, Pikes Peak Library District, Southeastern Colorado Water Conservancy District, the city and county. A residence in School District 11 will have a mill levy of 60.331, assuming that it isn’t located within an additional taxing district. For property classified residential, the current assessment rate is 7.96 percent of market value. So if the assessor values your home at $300,000, you’ll have to cough up $1,440.70 — not bad!

A tax loophole benefits the other guy. If it benefits you, it is tax reform.”

The assessment rate for most other types of property is 29 percent of actual value. Your $300,000 office building will be assessed at $87,000, and you’ll owe $5,248.79 — not good!

This is a consequence of the 1982 Gallagher Amendment to the state constitution, requiring 55 percent of total state property tax collections come from commercial property and 45 percent from residential. That 55/45 split reflected the actual ratio of property values in 1982.

Residential property values have far outpaced commercial values since then, and now account for 75 percent of assessed value statewide. The residential assessment rate has fallen from 21 percent to 7.96 percent, while the commercial rate remains fixed at 29 percent.

It would appear, then, that commercial property owners are the biggest losers. But they’re not alone.

Thanks to a steeply progressive federal income tax, states with higher incomes pay vastly higher federal taxes, payments that are unlikely ever to be matched by federal spending directed to those states.

Ironically, most of these high-paying states are the so-called blue states.