I don’t normally commit my political persuasions to paper, but I’m making an exception in this case because Colorado Amendment 69 is such a bad idea. In a nutshell, Amendment 69 creates a single payer health care system here in the state of Colorado that is funded by a 10% ColoradoCare tax. This is a 10% income tax applied to all forms of income; whether wages, rental, investment or interest. When added to Colorado’s current income tax of 4.63%, our income tax rate would be 14.63% and Colorado would be the state with the highest income tax rate in the whole nation.
Let’s look at it this way. Assume your total income is $100,000. You will pay a health insurance premium in the form of the ColoradoCare tax of $10,000. Now your neighbor has income of $50,000. His health insurance premium via ColoradoCare is $5000. You have identical coverage and you’re paying twice as much simply because your income is higher. Wyoming, with its zero state income tax rate, looks somewhat attractive now.
If you are an employer, you get to pay 6.67% of your employees 10% ColoradoCare tax and the employee pays 3.3%. So if this passes it immediately raises the cost of an employee by 6.67% to the employer, and the employee takes a 3.3% hit on his take home pay. This will drive a lot of small businesses out of business because they aren’t contributing to their employees’ health insurance premiums and now they will be forced to pop for 6.67% of their wages for health insurance. Don’t look for a lot of wage increases in Colorado if this passes.
What kind of effect will that have on Colorado’s economy? Tax increases do nothing but kill economic growth. They always have and always will. How do you think new businesses contemplating on locating to Colorado are going to feel about transferring employees to the “highest state income tax rate in the nation?” As Colorado’s economy begins to shrink under the weight of this tax, it will be like reverse compound interest. Shrinking economies mean shrinking revenues which translates into less revenue for ColoradoCare. When does the ColoradoCare tax increase from 10% to 15% or 20% to keep the program solvent?
If Colorado Amendment 69 passes, health insurance providers will leave the state and there will be no choice for residents. Health care providers will also have to fall in line with the program’s reimbursement rates and many will leave the state and practice their trade elsewhere. How long will you have to wait for that appointment then?
The healthcare system in our country is a mess and I don’t have the answer as to how to fix it, but the more I look at Amendment 69, the more I’m convinced that this is not the solution.
Mike Berry is a Registered Representative offering securities through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Legacy Wealth Management, LLC and Cambridge are not affiliated. Cambridge does not offer tax advice. These are the opinions of Michael Berry and not necessarily those of Cambridge. These opinions are for informational purposes only, and should not be construed or acted upon as individualized investment advice.
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