Colorado's new $1B in tax breaks may eliminate TABOR refunds
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Colorado lawmakers approved $1 billion in new tax breaks in the just-finished legislative session, a huge sum that now threatens the future of refunds under the Taxpayer's Bill of Rights.
Why it matters: The 26 new tax credits benefit certain interests — from parents and older homeowners to freight rail operators and moviemakers — instead of the popular TABOR refunds that go to all taxpayers.
Friction point: The redistribution of tax breaks decreases TABOR refunds by roughly $3 billion over three fiscal years, according to a new legislative economic forecast presented Thursday.
- In fiscal year 2024-25, it is possible the state will not issue TABOR refunds for the first time in five years because it won't have excess revenue above the constitutional caps.
What they're saying: Greg Sobetski, the chief legislative economist, called the reductions in revenue caused by the new tax credits "enormous" and noted it will create more risks to the state's budget in future years.
The intrigue: The size of the tax breaks is already generating concern from lawmakers because it's contributing to a $164 million shortfall in the current budget. State law requires a 15% reserve but it now sits at 13.5%.
- Sen. Barbara Kirkmeyer, a Weld County Republican and budget writer, called the situation "irresponsible" and blamed Democrats for overspending this session.
Between the lines: The Democratic majority is not lamenting the reduction in TABOR refunds. Many of the party's lawmakers want the state to keep the money instead of refunding it, but can't convince voters to make the change.
- Instead, this session Democrats shifted their strategy and pushed tax credits to direct money to their priorities, gutting TABOR refunds.
Zoom in: The largest new tax break starts this year and reduces state revenue by roughly $740 million a year. It would give parents filing individually making $75,000 or less up to $3,200 for each child under age 16, and Democrats believe it will lift families out of poverty.
- Another measure expands the earned income tax credit for low-income residents and reduces state revenue by $200 million a year in fiscal year 2025-26.