Query About Taxes (Denver, Colorado Springs, Aurora: sales, 2010, insurance)

[tc1000]

I had considered Colorado as a retirement location, but am concerned that its recent switch to Democrat control will end its small government, low tax environment. I would be interested in hearing what Colorado residents think the prospects are in this regard.

[jazzlover]

First, the only tax in Colorado that can be considered truly low is the residential property tax. Colorado has one of the lowest effective tax rates per dollar of fair market value of residential property of any state. Unfortunately, the tax is so low that residential properties oftentimes actually consume more in public services than they produce in tax revenue. Thanks to Colorado Constitutional provisions, there is a very heavy burden on commercial and industrial property tax payers in Colorado. In that regard, Colorado is not considered a "tax-friendly" state at all.

Income tax rates in Colorado are middling, compared to other states. Colorado also has one of the highest combined state and local sales tax rates in the United States. Its sales tax administration and collection system is also considered the absolutely most complicated in the United States for vendors to deal with, as well.

Colorado also has one of the highest fuel taxes in the United States. So, all in all, Colorado would be considered a "middling" state tax-wise. Thanks to the "TABOR" Amendment and other Constitutional provisions, the state has very little flexibility in adjusting its tax system for changing times. Fiscally, the state is increasingly a mess--and the way the Colorado tax system is structured, a depressed economic environment will seriously aggravate the problem.

Most all of this so structurally embedded that who controls the Legislature or Governorship doesn't make a whole lot of difference. Like many other states. Colorado has enacted various revenue limitation measures to control the size and taxation ability of government, but the citizenry has done virtually nothing to curb its insatiable appetite for public services. That, of course, can lead only to a massive fiscal train wreck down the road, but that is exactly the path this state is heading down.

And, yes, I spent years in public service in Colorado--watching a lot of this "up close and personal." Not pretty.

[tc1000]

Thank you for replying.

You may not consider Colorado a low tax state, but coming from Massachusetts where we have every imaginable tax, including a 5.3% Income tax, 5% Sales tax, an onerous Estate tax, an annual auto Excise tax, and among the highest property taxes in the nation, Colorado looks very good in comparison.

[jazzlover]

Originally Posted by tc1000

Thank you for replying.

You may not consider Colorado a low tax state, but coming from Massachusetts where we have every imaginable tax, including a 5.3% Income tax, 5% Sales tax, an onerous Estate tax, an annual auto Excise tax, and among the highest property taxes in the nation, Colorado looks very good in comparison.

Yes, I know that is true. Nonetheless, Colorado is still a middling state, tax-wise. Many locales in Colorado have sales tax rates over 7%, some over 8% (don't be fooled by the state's relatively low sales tax rate--counties, municipalities, and some special districts can and do impose their own sales and use taxes). Motor vehicle license fees are also not cheap in Colorado, and--if currently proposed legislation is enacted--will go up $60 per vehicle next year. Colorado also has a senior property tax exemption for those over 65 who have lived in their residence for at least 10 years, but it appears that it will not be funded for at least 2009 and 2010--so much for that. Thanks to some of Colorado's strict revenue limitation measures on taxes themselves, the state and local governments also rely more and more on fees to fund services--and those are generally not regulated. Also, limitations on revenue do translate into fewer public services than you may be used to. I don't necessarily consider that bad, but some people who relocate here find it quite disconcerting.

[Mike from back east]

A couple of tax points.

- Retirees age 55 and older each get an exemption on their COLO income tax each year. Up to $20k per person. My wife and I each get the $20k thus we shelter $40k of our pensions from COLO income tax, worth about $2k per year in direct savings.

- Colorado also gives residents a credit if they carry Long Term Care Insurance (LTCI). Our couples policy costs about $2.5k per year, and we get a $250.00 write off from COLO for that. Not sure what other states do that.

- Property tax on my 1999 Jeep Grand Cherokee and my 2004 Camry were a whopping total of $90.50 and tags for both came to $53.24. That seems pretty cheap to me.

There are websites for retiree and/or tax planning, but appearances can be deceiving. PA does NOT tax pensions, but I hear their estate tax can crush you, so can local taxes. IMO, best thing to do is find a place you really want to be, check it's affordability, but not worry about a few thousand dollars one way or the other. Living in crap city because it's cheap is a poor choice compared to the paradise you'd rather be in for a few thousand more.

[Itz]

Over 8% sales tax in this county.
Property tax is almost 1% of ACTUAL value.. they voted to raise it AGAIN last election.
Theres municipality taxes as well... DTC tax, Downtown Tax, Aurora Tax... depending on your location of work.

Don't forget the amount of FEES.

Its ridiculous!

[tfox]

Colorado has an income tax rate of 4.63%. While that's higher than states that don't charge income tax, it's actually the lowest income tax rate of any state that has an income tax. Residential property taxes for the most part are quite low, but that depends on where you live. The city of Denver, for example, is relatively low, but some of the city's suburban areas (particularly a few of the newer ones) manage to hit their residents up for high taxes to offset the cost of brand new infrastructure to serve them. Colorado Springs area's property taxes are really low, even lower than Denver's, due to that city's anti-tax sentiment.

As mentioned there is a "head tax" in the cities of Denver and Aurora, take a few dollars out of each of your paychecks if you WORK in those cities (it doesn't matter if you live there or not) -- a way that those cities try to get tax revenue from commuters. The total in Denver is $5.75 per month.

Sales taxes are a bit on the high side here, but the main problem with those is not for the consumer -- the merchants have to deal with a complicated and byzantine number of tax gathering authorities, which hurts their bottom line, naturally. Note that some municipalites don't tax grocieries (like Denver), while other municipalities do (like most of the suburbs, with the exception of Aurora).

I personally don't feel that taxes in Colorado are all that high, all things considered. Sure, I'd rather have no income taxes, but many states (like Texas) that have no income tax more than make up for it in property taxes and other taxes, so I'm not sure that's better. Clearly, states like Alaska, Wyoming, and Nevada have some extra streams of cash (oil, minerals, and gambling, respectively) that allow taxes to remain lower there.

One nice thing about Colorado is that there aren't really a lot of insidious "gotcha" taxes like many other states. Texas and New Mexico have just introduced a new "gross receipts tax" on small business that is causing many of them to fail in record numbers in this poor economy (GRT are a kick-you-while-you're-down tax -- their impact is hardest during economic downturns). We don't have Washington's infamous B&O tax. We don't have any number of numerous taxes that any northeastern state (except NH) will punish you with. Our taxes here are what they are, flat 4.63% -- WYSIWYG.