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Denver election 2021: Voters will be asked whether to cap sales tax rate

Denver voters are willing to raise taxes, made apparent in last year’s election when they approved two 0.25% sales tax increases as a means to raise money for climate change issues and support for the unhoused.

This year, voters are being asked, through Initiated Ordinance 304, to permanently cap the combined sales and uses tax rate in Denver at 4.5% — lower than the current 4.81%.

The man behind the proposed hard sales-tax cap is Garrett Flicker, the chairman of the Denver Republican Party. 

“Local sales taxes are highly regressive, meaning they’re much more burdensome for lower earners than for high earners,” Flicker wrote in an email to The Denver Post. “Denverites should cap the sales tax at 4.5% to limit the extent to which the city can rely on taxing the poor to fund services.” 

But the measure has opponents everywhere from downtown office towers to union halls to the City and County Building. 

Mayor Michael Hancock blasted the measure on Sept. 15, when he laid out his proposed $1.49 billion budget for next year. If 304 pases, he said, it would result in an immediate cut of up to $80 million from the 2022 budget, something he is determined to avoid after the COVID-19 pandemic wreaked havoc on city finances.

“It would inhibit our ability to continue to address the issues that the people have said are important for us to address; housing, affordable housing, homelessness, preschool, climate change, transportation, roads, solid waste, safety,” Hancock said. “Our quality of life would be impacted.”

City officials say 52% of all the money in the city’s general fund, a pot largely used to pay the city’s workforce including police and firefighters, comes from sales and use taxes.

The Denver City Council passed a proclamation opposing the measure earlier this week, saying, in part, that sales taxes are paid by visitors and residents alike and that the city has tried to keep low-income residents from being too impacted by sales taxes “by exempting food, fuel, medicine, and feminine hygiene products.”

Flicker pointed to an analysis of Ordinance 304 by the Common Sense Institute (a politically unaffiliated but business-focused think tank) that found Denver’s sales tax rate has risen almost 32% since 2018 because of six voter-approved measures. 

The analysis also found that if the sales tax rate was cut from 4.81% to 4.5% next year, tax collections would fall by $69.2 million but city revenue in total would only fall by 0.5% and still be well above 2019 levels.

The Common Sense Institute noted that individuals’ savings would vary based on spending habits, but estimated the average Denver household would save $120 a year if 304 passed. 

But there’s another sticking point for opponents: The measure mandates that if voters approve sales tax increases in the future, those must be offset by cuts to keep the aggregate tax rate under 4.5%. 

If 304 passes, city staff would have to immediately work with the City Council to figure out what to trim in 2021, Department of Finance spokeswoman Julie Smith said.  Dedicated sales-tax funds like the green initiatives tax passed last year would not be immune, she said. Even the city’s marijuana sales tax could be affected, given this year’s Initiated Ordinance 300. 

The Downtown Denver Partnership is one of the organizations against 304, and president and CEO Tami Door calls the ballot measure too restrictive and short-sighted. 

“This isn’t a community that values restrictions on their future decisions,” Door said. “And this is a restriction on future opportunities that we may want to evolve and on future problems that we may want to solve.”