Democrats have a plan to cut tax credits for some businesses and wealthy Coloradans, bringing in about $375 million for the state. At the same time, they’ll look to help hundreds of thousands of families by increasing tax credits for the working poor.
The two bills containing the proposals were introduced Monday, with only a few weeks left in the session.
One bill, HB21-1311, concerns personal incomes taxes and suggests a series of actions that include capping itemized deductions for people who make at least $400,000 at $30,000 for individuals and $60,000 for joint filers. Bill sponsors believe it will return a projected $111 million annually to the state.
Another proposal, HB21-1312, concerns business taxes and aims to take away tax breaks for certain industries to bring in money for the state, including large insurance companies (estimated $80 million a year); coal, oil and gas industries ($25 million a year); and large retailers that generate at least $1 million a month in sales ($17 million a year).
Loren Furman, chief lobbyist for the Colorado Chamber of Commerce, questioned why lawmakers would do this now, given the state is poised to receive more than $3 billion in federal stimulus money and has returned to a stable revenue position.
“There isn’t that desperate a need for tax revenue in the state,” she said.
Bill sponsor Rep. Emily Sirota of Denver responded that Democrats were “uninterested in perpetuating the myth of trickle-down economics. What we’re doing is modernizing the tax code.”
Their plan is to pair eliminating the tax breaks with increasing the business property tax exemption to $50,000 from $18,000, a move aimed at helping small businesses.
They also want to use the money from the undone tax breaks to increase and expand access to the Earned Income Tax Credit and fund the Colorado Child Tax Credit — two things meant to help working families, who have struggled disproportionately during the pandemic and who pay higher taxes than the rich as percentage of income.
Sirota she expects the addition to the state Earned Income Tax Credit alone will more than double savings from the current $217 a year for at least 330,000 Colorado families.
Colorado lawmakers can’t raise taxes without voter consent due to the Taxpayer’s Bill of Rights (TABOR), so Democrats who seek to implement progressive fiscal policies must work around the edges.
“Absolutely, because of TABOR, we have to scrutinize tax expenditure. It’s one of the levers we have to look at,” said Sen. Chris Hansen, a Denver Democrat who is also sponsoring the bills.
Gov. Jared Polis opposed and later oversaw the diluting of last year’s related effort, HB20-1420, insisting tax-break eliminations be paired with an income tax cut. Democratic lawmakers refused, though the income tax cut eventually passed in November through Proposition 116.
Polis spokeswoman Shelby Wieman said the Democratic governor wants to “get rid of special-interest tax breaks and loopholes to pay for this broad-based tax relief,” and supports the two newly introduced bills.
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