Colorado lawmakers tap reserve, end tax breaks to fill budget gap
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Democratic leaders at the state Capitol outlined plans Tuesday to increase taxes, cut services and tap reserve funds to close a $1 billion budget hole spurred by President Trump's "big, beautiful bill."
State of play: The legislation will generate fierce debate about how the state should manage its money when lawmakers return Thursday for a special legislative session.
The core of the Democratic plan eliminates a handful of corporate tax breaks worth a combined $300 million to $400 million.
- The five-bill package will limit the business tax deduction, remove corporate tax breaks on foreign-sold goods and crack down on corporate profit shifting to tax haven countries.
The intrigue: The most controversial proposal is lowering the state's 15% financial reserve by $200 million to $300 million, dropping it to 13% at a time when fiscal analysts are warning about a potential recession.
Yes, but: Those moves are not enough to close a roughly $750 million gap.
- Instead, lawmakers will punt $300 million in spending cuts to balance the $44 billion state budget to the governor in consultation with the legislative Joint Budget Committee in the coming weeks.
- The governor is expected to move quickly to implement cuts by Sept. 1.
What they're saying: "We're looking forward to rolling up our sleeves and making sure we can maintain strong fiscal stewardship here in Colorado," Gov. Jared Polis told Axios Denver in a recent interview.
Between the lines: More than most states, Colorado is susceptible to changes in federal taxes because they affect state income taxes. The federal tax bill, known as H.R. 1, reduced the state's individual and corporate income taxes by an estimated $1.2 billion, according to the governor's office.
The other side: Republican state lawmakers are touting the cuts from Trump's tax bill and pushing back against Democratic efforts to generate new tax revenue, suggesting spending cuts are what is most needed.
- Sen. Byron Pelton (R-Sterling) plans to introduce legislation requiring voter approval for any bill that changes state tax liability caused by federal tax law.
What's next: Beyond the budget, Democratic lawmakers also plan to introduce legislation to stabilize the state's health care marketplaces amid projections that thousands of residents could lose their insurance and enable Planned Parenthood to accept Medicaid payments.
- A measure to adjust the state's first-in-the-nation artificial intelligence bill is also expected to debut later this week.