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F I S C A L I M P A C T R E P O R T

SPONSOR Payne

DATE TYPED 1/28/2005 HB HJR 6

SHORT TITLE Voter Approval of New Taxes

SB

ANALYST Taylor

REVENUE

Estimated Revenue

Subsequent

Years Impact

Recurring

or Non-Rec

Fund

Affected

FY05

FY06

(Parenthesis ( ) Indicate Revenue Decreases)

Relates to HJR 5

SOURCES OF INFORMATION

LFC Files

Department of Finance and Administration (DFA)

National Conference of State Legislature (NCSL)

SUMMARY

HJR 6 proposes a constitutional amendment that beginning January1, 2007 would not allow the

legislature to enact a new tax or increase rates on existing taxes without approval by a majority

of voters. If tax increases are approved by the voters, they would become effective immediately

upon certification by the state canvassing board unless a later effective date is specified in the

proposal. The question would be put to voters at the next general election.

Putting the proposed increase before voters would require a two-thirds vote from both the house

and the senate.

FISCAL IMPLICATIONS

There are no immediate fiscal implications associated with this resolution. Approval would make

future revenue increases difficult since any increases would first have to get a two-thirds vote

from each house of the legislature and then approval of the voters. The provision putting the

vote before the voters at the next general election would make it difficult, if not impossible for

the legislature, to address immediate fiscal problems.

House Joint Resolution 6 -- Page 2

SUBSTANTIVE ISSUES

The Department of Finance and Administration submitted the following analysis:

As a policy guideline, tax policy should be symmetrical, meaning that enacting tax in-

creases and decreases should be equally difficult. This resolution would detract from

that ideal by making tax increases much more difficult to enact than tax decreases, put-

ting downward pressure on revenue collections. In practice, the tax system is already

tilted in favor of tax cuts by the backlash politicians receive from the voters when at-

tempting to raise taxes.

Because general elections occur every two years, the resolution would delay the state's

ability to respond to revenue shortfalls. If the legislature passed and the governor signed

into law a tax increase in the 2007 session, voters could not approve that increase until

the state canvassing board certified the results of the November 2008 vote, a 1 1/2 year

delay.

Colorado's Taxpayer Bill of Rights Amendment (TABOR) also requires that tax in-

creases be approved by voters. Because of this restriction, Colorado's legislature and

governor did not consider raising revenue to balance any of it's budget shortfalls in the

fiscal crisis FY 2001-2004. Further, during the state fiscal crisis of FY2001-2004, states

generally did not rely on tax increases to balance budget shortfalls, but relied instead on

short-term solutions such as reserve spending, debt refinancing, and tobacco settlement

securitization. This hesitance to raise taxes tended to stem from fear of political back-

lash, not from constitutional or statutory restrictions against doing so.

BT/lg