Bright Colorado initiative opponents misrepresent a study predicting the measure’s effect on employment
Some activists opposed to the Bright Colorado initiative to increase tax revenue for public education have seized on a study a conservative group issued in April that predicts changes in job growth and migration if the measure passes. Some opponents claim, incorrectly, that the study projects the initiative will result in dramatic job losses.
The study makes no such projection. In fact, although the authors do not emphasize the point, the study projects statewide employment growth of 12.9 percent from 2011 to 2017 under the Bright Colorado measure. That's lower than the 14.3 percent growth projected under current state tax rates, but it's far from a debilitating blow to the economy. Given the unpredictability of economic conditions, which the study acknowledges, a purported difference of 1.4 percentage points in projected employment growth six years in the future is a poor basis for creating policy.
The study does not project any “job loss” resulting from the Bright Colorado measure. Study authors Eric Fruits and Randall Pozdena, claim passage of the initiative would slow employment growth during the six years from 2012 to 2017, a claim quite different from putting people out of work.
Fruits, the primary author, reaffirmed the projection in an interview with The Huffington Post website1 published on June 24. “If the tax increases remain in effect through 2017, then employment in that year would be 30,500 lower than otherwise,” he said. “I was also careful to characterize the findings as differences in employment rather than 'job losses.' … The difference between reduced employment and job losses is subtle, but important.”
Conservative advocacy organization commissioned the study
The study is entitled “Tax Policy and the Colorado Economy – The Effects on Employment and Migration.”2 It was commissioned by the Common Sense Policy Roundtable, which describes itself as a “free-enterprise think tank dedicated to the protection and promotion of Colorado‟s economy.”3
The study authors examined initiatives advanced by the Colorado Fiscal Policy Institute (later withdrawn) and by state Sen. Rollie Heath, who is among the main supporters of the Bright Colorado measure. The measure will be Proposition 103 on Colorado‟s election ballot in November. It would increase the state sales tax rate from 2.9 percent to 3 percent, and it would increase the state income tax rate from 4.63 percent to 5 percent. The additional money would be devoted to spending for preschool through college education. Tax rates would revert to previous levels after five years.
A persistent myth about the study’s findings
In numerous venues, opponents of the Bright Colorado measure have incorrectly characterized the findings of the Fruits study by reporting it projects the measure “will kill 119,000 jobs,”3 and similar language. A sampling:
- The Common Sense Policy Roundtable perpetuated the myth in a May 26 news release calling attention to the study.3
- A June 12 opinion piece by Earl Wright of the Common Sense Policy Roundtable published in the Pueblo Chieftain reported the incorrect figure.4
- The same piece was published June 19 as an online-only commentary on The Denver Post's website5. Buz Koelbel and Terry Stevinson were listed as authors with Wright.
- Colorado's Senate Republicans issued a statement that included a citation of the study and the erroneous figure.6
- A May 28 blog post by the Centennial Institute, affiliated with Colorado Christian University, reported the incorrect figure.7
- An Aug. 5 opinion piece published in the The Daily Sentinel of Grand Junction by former state Sen. Josh Penry repeated the error.8
The study’s actual findings
Fruits reaches two main conclusions about the economic effects of the Bright Colorado initiative. First, he suggests “the reduction in growth rates over time indicate that the Heath Measures will reduce employment ….” Second, the study asserts “the Heath Measures would substantially slow the migration of taxpayers to Colorado.”
Opposing commentators have drawn little attention to the study's conclusions about taxpayer migration. That issue is addressed in detail in a paper issued Aug. 4 by the Center on Budget and Policy Priorities, “Tax Flight Is a Myth – Higher State Taxes Bring More Revenue, Not More Migration.”9
The focus on an erroneous figure supposedly projecting job loss is perplexing because the figure opponents cite appears nowhere in the study. Fruits repeatedly cites his projection of a cumulative reduction in employment growth of 30,500 by 2017. The study includes a line graph as Figure 1 that shows statewide employment projections attributed to Colorado Legislative Council Staff along with the author's adjustment to the employment projections assuming passage of the Bright Colorado measure. In 2017, the final year for which the study offers figures, the projected statewide employment under current tax policy is 2,556,000, and the author's projected statewide employment under the Bright Colorado measure is 2,525,000.
That's a difference in projected job growth of 31,000 jobs. Presumably, rounding accounts for the difference with Fruits' 30,500 figure for reduction in job growth. Fruits predicts a reduction in the rate of growth of new jobs in Colorado, not a reduction in the number of people working.
Even if the author's prediction turns out to be accurate, his statewide employment projection under the Bright Colorado measure indicates 289,000 more jobs in 2017 than exist in 2011. That is not indicative of severely impaired economic performance, and it would certainly be preferable to the alternative of continued drastic cuts to education spending, which pose a much more severe long-term threat to the ability of state residents to prosper.
Opponents improperly add annual projections that are already cumulative
Commentary from multiple sources, including the Common Sense Policy Roundtable, has distorted the study's projections to arrive at the “job loss” figure. In the case of the Common Sense Policy Roundtable's news release, a table shows the “Impact of Heath measures on Colorado employment,” including the study's cumulative annual projected reductions in employment growth from 2012 to 2017. That is an accurate representation of the study's projections.
The news release then improperly adds a column to the table labeled “Cumulative Reduction in Employment,” where the release adds the study's figures, year by year, even though the figures are already cumulative. The result is the news release's unsupported assertion of “119,700 fewer working Coloradans.”
Study is narrowly focused and offers little support for its assertions
The closest the study comes to an explanation of methods is a blanket statement: “The study uses regression analysis, a widely used econometric technique. It measures the relationship between employment growth for a given state at a given point in time, and the statutory tax rates in place in the various states.” Fruits explains the study uses data from the U.S. Bureau of Labor Statistics, tax rates from the Tax Foundation and “regional economic/demographic variables” from the U.S. Bureau of Economic Analysis.
The study makes no mention of positive economic effects that could result from increased funding for education, although the benefits of education for job acquisition and earnings are well documented. It also does not attempt to quantify the economic benefit of public-sector workers, such as teachers and school administrators, whose jobs would be saved if the Bright Colorado initiative helps the state avoid further education spending reductions. Multiple passages discuss “a potentially significant shift of resources from private hands to the public sector,” as if public-sector spending is harmful to the economy.
Author wisely advises caution
The study even casts doubt on its own conclusions as the author writes: “At this time in US history, there are many major policies in flux and world economic conditions are volatile. Therefore, any forecast of the effects of a single state's policies should be embraced cautiously. This is true of the analysis presented in this report as well as projections made by others.”
How the Bright Colorado initiative strengthens the state’s economy
Colorado's economic recovery faces many threats, but investing in children's education – an investment in their ability to earn – is simply not one of them.
Just the opposite. Colorado has slashed spending on education to the point that state funding of public schools is among the lowest in the nation. The state's rank for spending on public colleges and universities is even worse. The results are bigger classes, deteriorating facilities and tuition rates that are unaffordable to all but the very wealthy. Those conditions should worry everybody, including those who prize Colorado's ultra-low tax rates.
The real threat to Colorado's economic recovery would come if the state were unwilling to change course and make the investments that support growth.
Contact: Perry Swanson
303-573-5669, ext. 306
Released Sept. 15, 2011
End notes
1 Grenoble, Ryan. “Senator Heath's Education Funding Initiative 25 Triggers Jobs Debate,” Huff Post Denver, June 24, 2011. Accessed Aug. 16, 2011. http://www.huffingtonpost.com/2011/06/23/education-funding-colorado-initiative-25_n_883493.html
2 Fruits, Eric. “Tax Policy and the Colorado Economy – The Effects on Employment and Migration,” Commissioned by the Common Sense Policy Roundtable. Accessed Aug. 15, 2011. http://www.commonsensepolicyroundtable.com/2011/05/tax-policy-and-the-colorado-economy/
3 Common Sense Policy Roundtable, press release, “National economist: Heath tax increase will kill 119,000 jobs,” May 26, 2011. Accessed Aug. 15, 2011. http://www.commonsensepolicyroundtable.com/wp-content/uploads/2010/11/Tax-Study-Press-Release.pdf
4 Wright, Earl. “A job-killing stab at funding education,” Pueblo Chieftain, June 12, 2011. Accessed Aug. 15, 2011. http://www.chieftain.com/opinion/ideas/a-job-killing-stab-at-funding-education/article_7bf6d64e-93bb-11e0-8798-001cc4c002e0.html
5 Wright, Earl. “Guest Commentary: Tough tax choices in Colorado,” The Denver Post, June 19, 2011. Accessed Aug. 15, 2011. http://www.denverpost.com/opinion/ci_18291740
6 “Independent Study Confirms Job Losses if Heath‟s Tax Increases Passes,” ColoradoSenateNews.com. Accessed Aug. 15, 2011. http://www.coloradosenatenews.com/?q=content/independent-study-confirms-job-losses-if-heath%E2%80%99s-tax-increase-passes
7 “Study: Colorado tax hike would cost 119,000 jobs,” Centennial Institute, May 28, 2011. Accessed Aug. 15, 2011. http://www.ccu.edu/centennial/blog/post/2011/05/28/Study-Colorados-proposed-tax-hike-would-cost-119000-jobs.aspx
8 Penry, Josh. “Sen. Rollie Heath takes job-killing tax hike to voters,” The Daily Sentinel, Aug. 5, 2011. Accessed Aug. 16, 2011. http://www.gjsentinel.com/opinion/articles/sen_rollie_heath_takes_jobkill
9 Tannenwald, Robert. “Tax Flight Is a Myth – Higher State Taxes Bring More Revenue, Not More Migration,” Aug. 4, 2011. Accessed Aug. 15, 2011. http://www.cbpp.org/cms/index.cfm?fa=view&id=3556