Colorado, The Not So Low Tax State

Colorado's per capita state and local tax burden in 2004 was $3,169. This ranks 25th out of the 50 states, and if you include the District of Columbia, it would be the median state in terms of per capita tax burden. The national average is $3,447.

Colorado regularly makes headlines for its very low level of state taxes. Only Texas and South Dakota impose fewer dollars of state taxes per capita. But, as I've noted before, that doesn't actually mean that Colorado is a low tax state.

Colorado makes up for meager state level taxes, with hefty local taxes. They are an unusually high 59% of the total tax burden in Colorado, compared to a national average of less than 50%. This flows in part from particularly widespread use of local sales taxes, and high property taxes on real and personal property owned by businesses. While Colorado's combined state and local sales tax rates are similar to many states, few states allocate such a large share of that sales tax revenue to local government. Few states tax real property of businesses at the much higher rate than homeowners that Colorado does. And, many states don't have a property tax business personal property at all.

Also, while state level TABOR modifications (TABOR is a state constitutional limitation that requires voter approval to exceed certain government revenue limits), like recently passed Referendum C, are rare, they are very commonly passed at the local government level. Indeed, contrary to the idea that TABOR is really about voter control of tax levels, Republican Governor Owens, this session, vetoed two bills where state legislators wanted to simply allow voters to vote to increase local taxes for various purposes, SB 47 which allowed taxes for health care, HB 1005 for full day kindgarten.

Of course, the other question is whether per capita tax burden in dollars is a fair measure. Colorado is a state with an above average per capita GDP and personal income. The fact that it has only average overall state and local taxation implies that its rate of taxation is below average.