View From a Height

Judging Financial Impact

By law, any piece of proposed legislation must be assessed for the future financial impact on the state, looking at project effects on both taxes and spending. Like this assessment of this seemingly innocuous bill, for instance.

Now, Representative McCluskey and Senator Lamborn are proposing that Colorado adopt Dynamic Modeling to assess these effects for tax policy changes at the request of the Assembly leadership. This made quit a stir when the national Republicans started using it for changes at the Federal level a few years ago.

It makes sense. While models are inexact, the fact is that by projecting out straight-line, you're already using a model, just a lousy one. People do adjust their behavior based on tax incentives; the entire tussle over securitizing the tobacco revenue stream is predicated on this fact.

Democrats tend to dislike this sort of analysis, because it inevitably shows that higher tax rates depress business activity, and therefore revenue, in the long run. Again, beyond a certain point, this is a fact. Even the Tsar is having to sell his plan by using language like, "lowering the income tax rate and keeping the extra money it generates" (emphasis added).

One peculiarity is the limitation to 10 bills a year. There's no specific mention as to whether or not the leadership will have to throw a red flag, or if they'll be assessed a timeout.

So far the bill is still in committee. I'll try to find out more about its status.