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Kelly Sloan

The state budget is being debated in the House this week, the Senate next, and is sure to draw a fair amount of ire both from those who believe the government has a duty to exhibit fiscal restraint, and those who believe the government can’t spend your money fast or broadly enough.

At $36.4 billion, this year’s state budget is around $2 billion higher than last year, and that doesn’t count another roughly $3 billion in federal American Rescue Plan Act (ARPA) monies. Under a sky darkened by crisscrossing dollars, we can at least be reassured that in the state of Colorado the debate over the budget will be conducted under the constitutional aegis of the state’s balanced-budget requirement and TABOR. The state’s quarterly economic forecast reveals that Colorado taxpayers are due about $2 billion in refunds (i.e., what they overpaid to the state) each year over the next three. And, barring the sort of terminological legerdemain that replaces the word “tax” with “fee," the legislature cannot raise taxes absent a popular ballot measure.

No such blessed restraints exist in Washington D.C. President Biden released his budget plan earlier this week, and even though it is essentially meaningless  Congress will do whatever Congress will do  it is still worth paying attention to as a statement of direction and policy intent.

That intent is, at least ostentatiously, somewhat divergent from what it was a year ago. Since last year several things have happened  the Russian invasion of Ukraine, record-high inflation, crime rising to levels impossible to ignore, atrocious poll numbers  that made some impacts on the proposal.

This injected a few slivers of hope and reality into the budget. For instance, the Administration is calling for $17 billion for law enforcement, including, from the White House fact sheet, “$30 billion in mandatory resources to support law enforcement, crime prevention and community violence intervention, including putting more officers for community policing on the beat across the Nation.” God willing, this is an official repudiation of “Defund the Police," possibly the most ill-conceived policy idea since somebody decided to bring a suspiciously large wooden horse into Troy.

The budget makes a nod toward a responsible level of military spending, but that’s about it. The administration is proposing a 4% increase in the defense budget, which might be great if the inflation rate weren’t 7%. Yes, the $813 billion allocated for mounting the nation’s defense is the largest ever, but that is a rather meaningless datum; the more relevant number is 3.1%, defense spending as a share of GDP, around where it was in the heady days of post-Cold War disarmament. This, and major cuts to important weapon systems, as we head into waters roiled by Russian, Chinese and other threats.

Without doubt, the worst part of Biden’s budget is his tax proposals, and the worst of those is the absurd, and duplicitously named, “billionaire minimum income tax”. Essentially a tax on wealth, this economic ignominy would impose a new tax on folks with $100 million or more in assets (by definition not “billionaires"). The new 20% rate would apply to both ordinary income and… get this… unrealized capital gains  meaning a tax on money they haven’t made yet.

This of course ties into the perennial myth about the highest earners paying lower tax rates than the middle class. The myth works only so long as one forgets that the wealthiest among us make most of their money from investments, not income. Investment is taxed differently than income because, one, it is money that has already been taxed once, and, two, investment is an economic activity we want to encourage. Moreover, it is a risk  what happens if one pays 20% tax on the value increase of an asset, just to see that value plummet in the next year? Will the government give that money back? The plan is unclear on this point, but don’t bet on it.

The proposal is also likely unconstitutional  the Sixteenth Amendment authorizes Congress to collect taxes on incomes, but you don’t have to be a strict constructionist to recognize that unrealized gains are not income.

I always hate placing much faith in Congress, but Sen. Manchin has already scoffed at the idea, which gives hope that at least this ridiculous proposal will meet a deservedly ignominious end. Is it too much to hope that Congress may one day take the enlightened step, borrowed from Colorado, to adopt a balanced budget amendment coupled with a restraint like TABOR? Oh yes, too much. Too much by far.

Kelly Sloan is a political and public affairs consultant and a recovering journalist based in Denver.

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