Taxing the Rich: The People’s Choice

Unsplash | Morning Brew

  •  
  •  
  •  
  •  

As the final sprint to the 2020 election kicks into gear, prepare to hear a lot about the choice at the top of the ticket and the accompanying admonitions not to forget down ballot races. However, just as importantly, voters will weigh in on an array of ballot initiatives and referendums in 26 states and Washington, D.C. Although these are often glossed over for splashy, partisan clashes, they represent one of few instances where voters have a direct say in policy, and their outcomes have profound effects. 

The economic implications of these ballot initiatives are particularly stark in two states. The first state is Colorado, where voters will decide whether or not to lower the flat rate for state taxes from 4.63% to 4.55%. The second is Illinois, where voters have the chance to leave behind a flat state tax in favor of a graduated, progressive tax system. These initiatives may seem like they ask a straightforward question – to raise taxes or to lower taxes – but the reality is far more nuanced and is mired by decades of falsehoods and special interest-backed talking points. 

Let’s take Colorado Initiative #306 first. On its face, this initiative would lower taxes, but this is hardly a good decision. Colorado is one of just nine states to have a flat tax system, a deceptive policy that imposes the same “flat” tax rate on everyone. In reality, it lets the top 1% get away with paying almost nothing while shifting the tax burden disproportionately to poor folks. Initiative #306 would exacerbate an already regressive tax by giving the wealthy and well-connected a huge tax break. A 0.8% decrease adds up much faster for someone making millions than for a minimum wage working in Colorado making $23,088 annually. 

Additionally, if passed, the initiative will cost more than $300 million over the next two years while the state is simultaneously facing a budget deficit of over $1 billion. Unlike the federal government, state governments cannot borrow indefinitely, leaving less money for public health and unemployment services just as need for them spikes. Unfortunately, a separate ballot initiative that proposed graduated tax brackets did not receive enough signatures to get onto the ballot. This measure would have lowered taxes by almost the same amount for 95% of Coloradoans but raised $2 billion in revenue by increasing taxes on the wealthiest 5% of residents, demonstrating the clear benefits of a progressive tax structure. 

This much more progressive, fiscally responsible alternative is playing out in Illinois. Voters facing the proposed “Allow for Graduated Income Tax Amendment” will have the option to leave behind their regressive flat tax, pass a tax cut for most residents, and raise $3.4 billion over 12 months by raising taxes only on the top 3% of individuals in the state. This would create a more just tax system in which the wealthiest individuals pay their fair share, and it would ensure that the state government can continue serving to its fullest extent. 

By comparing these initiatives side by side, it becomes clear that the usual “more taxes/fewer taxes” debate is far too reductive and presents a false dichotomy. Governments and voters can protect the most vulnerable and give working Americans more cash in their pockets. They can cut taxes and ask those with more than enough to pay a little extra. 

As you hear politicians at every level of government argue about the economy and tax spending, remember this: the wealthy have built a system that works in their favor at the expense of everyone else. We can’t let them get away with it any longer.

Related Posts