Colorado could expand low-income tax credit while shrinking TABOR refunds
Colorado Democrats pushed forward a controversial bill during a special legislative session this weekend, going against the will of Colorado voters and expanding a low-income tax credit while shrinking TABOR refunds.
The bill, proposed by Democrats under the objections of Republicans, would provide nearly $200 million in tax benefits to over 400,000 lower-income Coloradans. The Earned Income Tax Credit (EITC) would be expanded, potentially providing eligible households with hundreds or even thousands of additional dollars, with few restrictions.
While Democrats argue that this is a necessary measure to support working families, Republicans are criticizing the move for reducing the size of next year's TABOR refund payments, which go to all taxpayers.
This goes against the wishes of voters who rejected Proposition HH by a wide margin of 60%.
“Voters came back and said, knock it off, quit it. Hey, for us in the minority, we had a victory,” said Minority Leader Mike Lynch. “We had a victory because the citizens actually stood up and said, no, stop, stop, knock it off. Leave my TABOR money alone – 60% of the voters!”
HB23B-1002, the bill under consideration, is largely focused on property taxes but Democrats have added additional policies to benefit lower-income Coloradans who are less likely to own homes. A move which should be out of the scope of a special session called specifically to address the property tax mess caused by Democrats when they repealed the Gallagher Amendment without a replacement.
The state's EITC is based on a federal credit of the same name and currently equals a quarter of the federal credit that households receive. Under the current proposal, the state match would double to 50% for the current tax year.
However, paying for this expanded tax credit would cost the state over $180 million, which would come from the expected TABOR refunds of $3.5 billion.
Senator Chris Kolker, a Democratic sponsor, argued that this move would also benefit lower-income renters who have been hit hard by the pandemic, and should not be ignored during this special session. Renters who do not pay property taxes, again taking this legislation outside the scope of the special session.
Republicans, on the other hand, see this as a redistribution of wealth, taking from taxpayers, and are critical of the change. The minority argue that it goes against the voters' decision and takes money from people who are not considered wealthy.
Rep. Gabe Evans of Fort Lupton stated, "Of course we want to help low-income families. So, let's give them clean taxpayer relief, let's give them clean tax cuts instead of picking winners and losers, taking money from folks who are by no means rich."
While it is not the first time that TABOR surplus money has been used to fund this credit, it will be the second significant change to TABOR refunds to come out of this year's special session.
Democrats are also proposing to "flatten" TABOR refunds, paying everyone the same amount regardless of their income. If this change were to pass alone, all taxpayers would receive about $850. However, with the expansion of the EITC, these "flat" refunds would be reduced to around $800.
“We know the outcome of these bills and this session, but after an overwhelming 60% vote to kill Preparation HH, voters spoke that they didn’t want their TABOR reduced to pad the pocket of Governor Polis agenda,” Rep. Ryan Armagost (HD64)
The impact of these changes combined means that any household making less than $104,000 would ultimately still receive larger refunds. However, higher-income households could see anywhere from a $100 to over $2,000 decrease in their refunds. According to the sponsor of the bill, the value of the credit is based on income and the number of dependents, with those in the middle-income range receiving the largest benefit.
Republicans have also raised concerns about the state EITC being refundable, meaning that even non-citizens with an Individual Taxpayer Identification Number (ITIN) can receive the credit in cash. Representative Evans expressed his concerns, stating, "You can have folks who aren't even citizens of the country getting more money out of the system than was originally paid in."
READ MORE:
SENATE DEMOCRATS AND REPUBLICANS SQUABBLE OVER PUBLIC ACCESS TO BILLS
EVEN KYLE CARK CALLED ON DEMS TO BE MORE HONEST & RESPECTFUL OF VOTERS
SPEAKER LOSES CONTROL OF HOUSE TO PROTESTERS, CHASTISES GOP MINORITY
The federal EITC was established under Republican President Gerald Ford and has been expanded by presidents from both parties, including Ronald Reagan.
In recent years, Colorado lawmakers have taken steps to expand the state credit, with some Republican support. However, the current bill, sponsored by Democratic Representatives Mary Young and Jenny Willford, has faced opposition from the GOP and is now being considered in the state Senate after passing in the House on Saturday.