Proposition 101 - Would Reduce Vehicle, Income Tax
and Telecommunication Revenues

Proposition 101 is a statutory change that reduces the State income tax, various motor vehicle fees and taxes and fees on telecommunication services. When fully implemented, the provisions of this proposal would reduce State income tax revenues, State and local revenues from a range of sales taxes and vehicle fees, and State revenues from telecommunications charges and fees.  While official estimates are not available, it is possible that annual revenue losses will be substantial.

Vehicle Fees and Taxes.  Starting January 1, 2011, the following rules would apply:

  • Specific ownership taxes must decrease in four equal yearly steps to $2 for new vehicles and $1 for old vehicles.
  • All registration, license, and title charges combined shall total $10 yearly per vehicle.
  • There will be no State or local taxes on vehicle rentals or leases.
  • There will be no State or local taxes on the first $10,000 of value of vehicle sales prices (this is phased in over four yearly equal steps).
  • All other State and local charges on vehicles and vehicle uses must cease (except for the charges listed above and tax, fine, toll, parking, seizure, inspection, and new-plate charges).
  • Any new charges would be deemed to be taxes, which would apparently invoke the voting requirements of the Constitution.

Income Taxes.  The 2011 income tax rate shall be 4.5 percent (a reduction from the current rate of 4.63 percent).  Later rates shall decrease 0.1 percent yearly, in each of the first ten years that yearly income tax revenue net growth exceeds 6 percent, until the rate reaches 3.5 percent.

Telecommunication.  Starting January 1, 2011, no charge by, or aiding programs of, the State or local governments shall apply to telephone, pager, cable, television, radio, internet, computer, satellite, or other telecommunication service customer accounts.  Any new charges would be deemed tax increases, which would apparently invoke the voting requirements of the Constitution. Emergency 911 fees are permitted to continue at 2009 rates.

The proposal provides that "this voter-approved revenue change shall be strictly enforced to reduce government revenue."  The phrase "voter-approved revenue change" seems to refer to Article X, Section 20 of the Constitution ("TABOR").  It may be that the drafters intend to reduce the TABOR permitted revenue limits by this proposal and this may apply to governments that have had revenue change (i.e., debrucing) elections. 

The proposal is self-executing, severable, and a matter of statewide concern that overrides conflicting statutes and local laws.  Prevailing plaintiffs (but not defendants) must have their legal fees and court costs repaid.  The State must audit yearly compliance "to reduce unfair, complex charges on common basic needs."

If you have any questions regarding this article or its possible impact on your activities and operations, please contact your Sherman & Howard attorney or one of the attorneys in our Public Finance Group.

Sherman & Howard has prepared this advisory to provide general information on recent legal developments that may be of interest. This advisory does not provide legal advice for any specific situation. This does not create an attorney-client relationship between any reader and the Firm. If you want legal advice on a specific situation, you must speak with one of our lawyers and reach an express agreement for legal representation.

© 2010 Sherman & Howard L.L.C.                                                  February 5, 2010