This is the Cato Daily Podcast for Tuesday, November 1st, 2022.

I'm Caleb Brown.

Income taxes may be getting flatter in many states, but politicians are clever, and it's not all that hard for them to simply

redefine a tax as a fee. John Kildare has a cautionary tale from Colorado where

their taxpayer bill of rights has been slowly but surely made less

effective in the 30 years since its adoption. A lot of states have adopted tax

reforms that are like a ratchet. That is, it's that is

if state revenue exceeds some threshold

the state income tax rate is automatically cut. Kentucky adopted this this year I believe North Carolina

has it as well. How does that change incentives? How does that

politicians try to goose revenue?

So in 1992, Colorado passed the taxpayer bill of rights

called Tabor, and it had that mechanism in it. It didn't cut tax rates, but when

when income for the state grew by more than population plus inflation from last year. There would have to be a refund, which

was either you refund the money back to the people or you ask the people if they want if we can keep it and they originally was for four years

so they called it a table override the term was debrusing because Doug Bruce did

the taxpayer bill of rights. What we found was

there's all sorts of ways around it and what we hope to do is build something that

builds a constitutional ratchet as you said.

So we've been able to over time lower the tax rate, but amazingly, Colorado's tax receipts continue to grow at an exponential rate, even though our tax rate keeps going down.

Okay, so how does that happen?

The beautiful thing about the taxpayer bill rights is that every candidate likes the idea running,

...