Amendment 69 will raise $25 billion in new tax revenue-nearly doubling the size of the current state budget - to support a government-run health care system. There are many important questions that Amendment 69 leaves unanswered, but here's how the taxes will work...as best as we can tell.Payroll Taxes: Employers will pay 6.67 percent on all payroll. Employees will pay 3.33 percent on all payroll income. This totals a new 10 percent tax on all wages and earnings.
Example 1: Jack earns $1,000 a week. Jack's employer must pay $66.70, and Jack must pay $33.30 each week in ColoradoCare taxes. If the employer so chooses, it may elect to pay Jack's share of the taxes.
Non-Payroll Taxes: In addition to the payroll taxes just described, a 10 percent ColoradoCare tax will be assessed on all non-payroll income. This includes:
Example 2: Jack receives interest income of $100 on his savings account and some dividend income of $200 on stock he inherited from his grandfather. Tim will have to pay ColoradoCare tax of $30 ($10 on the interest income and $20 on the dividend income) on his earnings.
Example 3: Jack has a gain of $18,000 on stock he purchased 10 years ago and sold this year. He must pay Colorado Care tax of $1,800 on the sales of the stock.
Example 4: Jill is an individual proprietor with a small print shop. She sells some antiquated equipment at auction for a $12,000 gain. Jill must pay $1,200 in ColoradoCare tax on the gain.
Example 5: Jack and Jill purchased their first home last year and, as a consequence, were able to itemize their deductions. Doing so generated a state income tax refund of $900 they have to include in income this year. They must also pay ColoradoCare tax of $90 on that refund income.
Example 6: Paul finally retired this year at age 68 and received a $96,000 lump-sum distribution from his retirement fund. Paul will have to pay ColoradoCare tax of 10%, or $7,200, on $72,000 of the distribution ($96,000 - $24,000 = $72,000 times 10% is $7,200).
Example 7: Jack and Jill are starting a new business and incorporate as a regular "C" corporation. Including themselves, the Corporation has ten employees with total salaries of $480,000 and makes a profit in the first year of $80,000. They re-invest the profit in additional equipment.
The corporation's total ColoradCare tax on salaries will be 10% of the $480,000 or $48,000 (6.67%, or $32,016 will have to be paid by the Corporation and 3.33%, or $15,984 will be withheld from the employee's wages). There is no ColoradoCare tax on the profits earned by the Corporation.
Example 8: Jack and Jill are starting a new business and decide to establish a partnership rather than a corporation. Including themselves, the Partnership has ten employees with total salaries of $480,000 and makes a profit in the first year of $80,000. They re-invest the profit in additional equipment.
The Partnership's total ColoradoCare tax on salaries will be 10% of the $480,000 or $48,000 (6.67%, or $32,016, will have to be paid by the Partnership and 3.33%, or $15,984, will be withheld from the employee's wages). However, Jack and Jill will also have to pay 10% or $8,000 ColoradoCare tax on the Partnership's profits and will only have $72,000 in reinvest. In short, starting out as a pass-through entity (partnership, LLC, LLP, or S corporation) will cost Jack and Jill an additional $8,000 in ColoradoCare taxes.
The only income excluded from this 10 percent non-payroll income tax is alimony, unemployment income and the exempted portion of retirement income, which typically is an amount less than $24,000.