These are all of the taxes and fees bills proposed in the 2021 session. Each bill has its own bill number, please use your browser search feature to find the bill you are interested in. Return to the Colorado home page to pick a different bill category.

None of the text is the opinion of Engage. Each bill's description, arguments for, and arguments against are our best effort at describing what each bill does, arguments for, and arguments against the bill. The long description is hidden by design, you can click on it to expand it if you want to read more detail about the bill. If you believe we are missing something, please contact us with your suggestion. Some of these bills have the notation that they have been sent to the chamber's "kill" committee. This means that the leadership has decided to send the bill to the State committee even though it does not belong there based on its subject matter. This committee, in both chambers, is stacked with members from "safe" districts and the idea is to kill the bill without forcing any less safe members to take a hard vote. It is possible for a bill to survive the kill committee, but it is very rare.

Prime sponsors are given after each bill, with Senate sponsors in () and House sponsors in []. They are color-coded by party.

Some bills will have text highlighted in pink or highlighted in orange or highlighted in yellow. Pink highlights mean House amendments to the original bill; orange mean Senate amendments; yellow highlights mean conference committee amendments. The bill will say under the header if it has been amended.

Each bill has been given a "magnitude" category: Mega, Major, Medium, Minor+, Minor, and Technical. This is a combination of the change the bill would create and the "controversy" level of the bill. Some minor bills that are extending current programs would be major changes if they were introducing something new, but the entire goal here is to allow you to better curate your time. Something uncontroversial likely to pass nearly unanimously that continues a past program may not be worth your time (and please remember, you can still read all of the minor bills!). Technical bills are here to round out the list. They are non-substantive changes.

House

Click on the House bill title to jump to its section:

MEGA

HB21-1197 Income Tax Credit For Income Taxes Paid KILLED BY BILL SPONSORS
HB21-1311 Income Tax PASSED AMENDED
HB21-1312 Insurance Premium Property Sales Severance Tax PASSED AMENDED
HB21-1327 State And Local Tax Parity Act For Businesses PASSED

MAJOR

HB21-1265 Qualified Retailer Retain Sales Tax For Assistance SIGNED INTO LAW AMENDED

MEDIUM

HB21-1079 Modify Property Tax Exemption For Veterans With Disabilities KILLED BY BILL SPONSORS

MINOR+

HB21-1002 Reductions Certain Taxpayers' Income Tax Liability SIGNED INTO LAW AMENDED
HB21-1083 State Board Assessment Appeals Valuation Adjustment SIGNED INTO LAW
HB21-1292 Report Revenues From Sports Betting Activity PASSED AMENDED
HB21-1308 Property Tax Administrative Procedures KILLED BY BILL SPONSORS
HB21-1322 Gasoline And Special Fuel Tax Restructuring PASSED AMENDED

MINOR

HB21-1023 Energy Facility Real Property Classification KILLED BY HOUSE COMMITTEE
HB21-1061 Residential Land Property Tax Classification SIGNED INTO LAW
HB21-1077 Legislative Oversight Committee Concerning Tax Policy PASSED AMENDED
HB21-1261 Extend Beetle Kill Wood Products Sales Tax Exemption PASSED

TECHNICAL

HB21-1153 Enter Zone Child Care Income Tax Credit SIGNED INTO LAW
HB21-1154 Modification To Child Care Tax Credit To Address Defects SIGNED INTO LAW
HB21-1155 Sales Tax Statute Modifications To Address Defects SIGNED INTO LAW
HB21-1157 Accurate References For Department of Revenue Tax Administration SIGNED INTO LAW
HB21-1158 Special Fuel Farm Equipment Sales Use Tax SIGNED INTO LAW
HB21-1177 Add Use Tax Exemption To Some Sales Tax Exemption SIGNED INTO LAW

HB21-1002 Reductions Certain Taxpayers' Income Tax Liability (Moreno (D), Hansen (D)) [Weissman (D), Sirota (D)]

SIGNED INTO LAW

AMENDED: Minor

Appropriation: $130,254
Fiscal Impact: $24 million lost revenue in both 2020 and 2021, then $21.5 million in 2022

Goal:

  • Two things: fix a problem in a tax bill from last year to prevent taxes from rising on some people, which was not intended by that bill, and to accelerate the implementation of allowing access to a low-income tax credit to people without social security numbers from 2021 to 2020.

Description:

First this fixes a problem in a law passed last year that inadvertently interacted poorly with the federal CARES act. Basically, the CARES act increased the ability for people who use what is called pass-through income (they own their own business and “pass through” profit and loss from that business onto their personal taxes) to use losses both in the future and in the past to lower those taxes to get around annual caps on the amount of losses you can take. This allows someone who has massive losses (like many did in 2020 due to COVID) to “use” some of them in future years (and thanks to the CARES act on the federal level past years) to offset future gains instead of just losing it completely. See Additional Information for more detail.

The state attempted to in essence nullify CARES act retroactive changes for state taxes (Colorado tax law generally mirrors federal law) but instead state agencies interpreted the law in a way that made people unable to roll their losses forward if they took advantage of the CARES act provisions. The effect of this would be to increase their state taxes. This bill fixes this through a state tax deduction.

The second part is more straight-forward. That same tax bill last year included the ability for those without a social security number to get what is called the Earned Income Tax Credit (EITC) at the state level so long as they meet the income requirements. This bill simply moves implementation of this up from 2021 tax year to 2020. The EITC is available to taxpayers with incomes falling below certain thresholds. In 2020 those were $15,820 with zero children, $41,756 with one child, $47,440 with two, and $50,954 with three or more. Benefits also range depending on number of children, ranging from $538 to $6,660. The Colorado portion of this is a percentage of that benefit, $108 to $1,320.

Additional Information:

The pass-through works like this. Let’s say you had a business that lost $1 million in 2020. You cannot reduce the amount of tax you owe past $0 and the state has a cap on how much you can use. So you lost $1 million, but if you had to use it all in 2020, you’d “lose” the vast majority of it for future use. As opposed to a business that lost $250,000 in 2017, 2018, 2019, and 2020. They would get to use that $250,000 every tax year. The total loss is the same, so that is why we let businesses roll the losses forward, within set time limits so it isn’t indefinite. This bill doesn’t affect any of those mechanics, but it does restore the status quo.


Auto-Repeal: None

Arguments For:

Bottom Line:

  • We should fix errors, in particular when they would raise taxes on people when it wasn’t intended, and severe poverty has society-wide effects that do not discriminate based on social security numbers. No one in this state who pays state income taxes should be excluded and we should not wait a year to implement this change.

In Further Detail:

The easy part here is of course to fix unintended consequences. When state agencies interpret laws in ways the legislature didn’t intend, the legislature must fix the law. They did not want, and we should not want, taxes increased on businesses that suffered large losses in 2020. For the EITC, this is one of the most effective tools in our battle against poverty. Numerous studies have shown it boosts work effort, particularly among single mothers. This in turn helps get people off welfare programs. And severe poverty affects us as a society, through increased social safety net costs and worse outcomes for children. So it does not make sense to exclude any Coloradan who is paying state income taxes from this credit. Since we can implement this now, we might as well, rather than wait until 2021.

Arguments Against:

Bottom Line:

  • Those who are in this country illegally should not benefit from the EITC as it might make Colorado more attractive for them to come here.

In Further Detail:

We should not have expanded the EITC to include those without social security numbers, which is basically those who are in this country illegally. Immigration law is a federal matter, but the more attractive we make Colorado to those in the country illegally, the more likely it is that more of them will come to Colorado as opposed to other states (or simply staying in their home country). This is a chance to fix that error, rather than double down and start even sooner.

How Should Your Representatives Vote on HB21-1002

HB21-1023 Energy Facility Real Property Classification (Coram (R)) [Will (R)]

KILLED BY HOUSE COMMITTEE

Appropriation: None
Fiscal Impact: Likely none at state level, counties may get more property tax income

Goal:

  • Allow counties to reclassify property that was previously classified as agricultural if it has renewable energy generation facilities installed only if no agricultural activity is taking place on the land.

Description:

Current law does not permit the reclassification of land if it has renewable energy generation facilities installed on it. This likely lowers the value of the land for property tax purposes.

Additional Information: n/a

Auto-Repeal: n/a

Arguments For:

Bottom Line:

  • Land that has renewable energy generation on it is more valuable than agricultural land in most cases, but counties cannot reclassify it and so are missing out on critical tax revenues that mostly go to essential services like K-12 education
  • This is voluntary, no county is forced to do it

Arguments Against:

Bottom Line:

  • There is nothing that prevents solar facilities from being present on agricultural land and since we tend to be permissive on allowing designation as agricultural land we should keep doing so here
  • We want to encourage as much development of renewable energy sources as possible. If someone knows they may end up paying more property taxes on their land, they might not install the renewable energy generation facility and hurt our battle against climate change. It could also swing existing projects into operating at a loss, which could shut down existing facilities. That outweighs the potential property tax gains for counties

How Should Your Representatives Vote on HB21-1023

HB21-1061 Residential Land Property Tax Classification (Hansen (D)) [Gray (D)]

SIGNED INTO LAW

Appropriation: None
Fiscal Impact: None at state level, probable increase in property taxes at local level

Goal:

  • Clarify the law around when classification of property that does not have residential improvements on it can still be classified as residential.

Description:

Currently the land must be under common ownership and contiguous and used in conjunction with the land with the residential improvement. The bill changes this to require the same owner on the title deed and instead of in conjunction with, the land must have a related improvement. This means a driveway, parking space, or improvement other than a building used for residence. It also clarifies that contiguity is not interrupted by local streets, alleys, or common elements in a common interest facility. The bill also removes parcels of land in a residential subdivision with exclusive use established by the owners of the improvements.

Additional Information: n/a

Auto-Repeal: n/a

Arguments For:

Bottom Line:

  • The current law is just too vague and the continuity bit addition makes sense. The real big change is the ownership requirement, instead of just a common owner needing the exact same owner. This closes a bit of a loophole in property classification, as non-residential property is taxed at higher rates

Arguments Against: n/a

How Should Your Representatives Vote on HB21-1061

HB21-1077 Legislative Oversight Committee Concerning Tax Policy (Gonzales (D), Moreno (D)) [Benavidez (D), Bird (D)]

PASSED

AMENDED: Minor

Appropriation: $108,383
Fiscal Impact: About $150,000 each year the task force operates

Goal:

  • Creates the legislative oversight committee concerning tax policy. Members appointed by chamber leadership in usual unequal manner (2:1 in favor of majority party of chamber). Committee tasked with overseeing task force created by bill and with considering policy considerations in tax expenditure report prepared by state auditor. Must annually set agenda for the task force. Task force consists of 21 members of various backgrounds, including government officials, experts, and citizens. Task force will study all tax policy in the state and make annual recommendations to the legislature. It must also be available to the oversight committee to provide feedback on proposals not directly associated with the task force. Task force ends in July 2026.

Description:

Define in writing not later than 2nd meeting of year the scope of tax policy to be considered for the committee and the task force.

Additional Information:

Committee functions like other legislative committees in terms of membership and staffing from state staff. It must meet at least four times a year and committee members must attend at least one task force meeting. It is treated like an interim committee in terms of the rules around bill introduction deadlines and limitations on number of bills members can sponsor.

Task force must meet at least six times a year. Members are not compensated. Membership as follows:

  • Four non-voting expert members appointed by director of research of legislative council, director of office of legislative legal services, staff director of joint budget committee, and state auditor

Voting members selected by chair and vice chair of oversight committee with input from the governor and speaker of the house and president of the senate:

  • Representative of office of state planning and budgeting
  • Representative from taxation division of department of revenue
  • Representative of office of economic development
  • Representative of office of state treasurer
  • Two individuals from public or private institution of higher education, one with tax policy expertise and one with economics expertise
  • Four people representing local governments: one from home rule city, one from statutory city, one from home rule county, and one from statutory county
  • Two tax law practitioners not employed by a local government
  • Two CPAs not employed by a local government
  • Two people representing business owners, one small business and one large
  • One person representing a non-profit with expertise in tax policy


Auto-Repeal: Task Force, July 2026

Arguments For:

Bottom Line:

  • We haven’t had a comprehensive review of our tax policy like this since 2000: we are overdue
  • Any proposed changes will of course have to run through the regular legislative, and if appropriate, TABOR process

In Further Detail: We last had a comprehensive review of this sort of our tax policy in 2000 and the state has experience numerous tax code changes since then. The code has become more complicated and outdated through a long history of incremental and piecemeal modifications that may have resulted in unintended consequences, including the tax burden being borne disproportionately by some taxpayers and a diminished ability to attract and retain businesses in the state. We therefore need another comprehensive review and a more permanent structure going forward to keep an eye on the bigger picture, which is what this bill does. Any changes to the tax code will of course have to run through the legislative, and if appropriate, TABOR process.

Arguments Against:

Bottom Line:

  • We don’t need a formal task force to make changes to our tax code
  • Composition of task force only features 2 regular citizens

In Further Detail: We don’t need a formal task force to do a deep dive on tax issues. There are several outside groups who have done this work already (from both sides of the political aisle) and we should just rely on their work to guide our thoughts on what needs to be done going forward, rather than creating more layers of decision-making and fact-finding. The composition of the task force also only features two regular citizens (out of 21) and is to be constructed pretty much entirely without the input of the minority (Republican) party, with the rest either state or local government employees or tax experts. We need more regular voices for such a critical issue.

How Should Your Representatives Vote on HB21-1077

HB21-1079 Modify Property Tax Exemption For Veterans With Disabilities [Sandridge (R)]

KILLED BY BILL SPONSORS

Appropriation: None
Fiscal Impact: About $2.5 million each year

Goal:

  • Increase the maximum amount 100% disabled veterans can claim as 50% property tax exemptions for their homes from $200,000 to $300,000. Put in statutory language that will decrease the disability threshold required to qualify from 100% to 50% if the voters pass a constitutional amendment

Description:

The state is required to reimburse local governments for lost revenue under this provision of law (it is part of what is known as the Homestead Exemption). This exemption allows these veterans to exempt 50% of the value of their property taxes up to $200,000 (now). This means they do not pay ½ of the property taxes owed on the first $200,000 of their bill. If their house is not worth more than $200,000 then it applies to the entire property tax bill. If their house is worth more, than they start owing 100% on every dollar above $200,000. If, for instance, a house was worth $300,000, right now the veteran would owe ½ on the first $200,000 but the full amount on the next $100,000. So the home would be taxed as if it were worth $200,000, not $300,000. This bill would change that so the veteran would only owe ½ on the entire amount. Then it would be every dollar above $300,000 that gets charged full freight. That same home would be taxed as if it were worth $150,000.

The disability threshold is part of the constitution and can only be changed via amendment.

Additional Information: n/a

Auto-Repeal: n/a

Arguments For:

Bottom Line:

  • This is a small amount of money to pay to help keep up with the times: the exemption has not been raised since 2002, but obviously home values have shot up since then and continue to climb
  • The point is to help disabled veterans stay in their homes by reducing their property tax burden, and if the citizens of this state decide they want to lower the disability threshold in the future we will be ready

In Further Detail: The maximum amount of this exemption has not changed since 2002. Quite obviously it is worth much less now than it was then, so raising the amount up to $300,000 is barely going to dent the state’s budget but will make a huge difference for these veterans and their families. This is a program the voters of Colorado approved and we owe it to them to keep it current. The state has the power to reduce this exemption down to zero in tough budgetary times (as it did during the recession), so it won’t destroy our budget in good times, like right now. $200,000 doesn’t go very far when it comes to owning a home in Colorado anymore. It is time to change the law to recognize that.

Arguments Against:

Bottom Line:

  • This is not a means-tested program and only applies to home owners, renters get no help on staying in their homes

In Further Detail: This program is not means-tested, which means that although the value is capped at $435,000, someone who owns a multi-million dollar home still gets that 50% exemption on the first $435,000. Because you also have to own your home to benefit, the program also disproportionately benefits wealthier veterans (and white veterans). We don’t need to make it more generous on the upper end, if anything we need to think harder about how we can help those on the lower end.

Bottom Line:

  • This change actually does not keep up with home value changes in our state, it falls short. Need to boost the maximum amount higher

Bottom Line:

  • What about our seniors? They make up the vast majority of the homestead exemption population and deserve to have their maximum amount moved as well

How Should Your Representatives Vote on HB21-1079

HB21-1083 State Board Assessment Appeals Valuation Adjustment (Priola (R), Zenzinger (D)) [Benavidez (D)]

PASSED

Appropriation: None
Fiscal Impact: None at state level, probably slight increases at local levels

Goal:

  • Allows state board of property tax assessment appeals to increase valuations upon appeal.

Description:

Right now if a property owner appeals the valuation of their property for tax purposes by their local jurisdiction, the state can only affirm or decrease the valuation.

Additional Information: n/a

Auto-Repeal: n/a

Arguments For:

Bottom Line:

  • It is only fair that a true appeal will try to set the true value—not simply look to see if we can reduce it. This would also make it less likely for people to appeal without good reason: right now there is no downside to making an appeal so it literally makes sense for everyone in the state to do it. People should appeal when they think there was a true mistake made

Arguments Against:

Bottom Line:

  • This may have a chilling effect on appeals—if someone is going to risk having their valuation go up they may be much less likely to appeal and some improperly high valuations may go unchallenged

How Should Your Representatives Vote on HB21-1083

HB21-1153 Enter Zone Child Care Income Tax Credit (Moreno (D)) [Arndt (D), D. Valdez (D)]

TECHNICAL BILL

From the Statutory Revision Committee

SIGNED INTO LAW

Description: Repeal an obsolete enterprise zone child care contribution tax credit that only applied to tax years before 1999.

HB21-1154 Modification To Child Care Tax Credit To Address Defects (Moreno (D)) [Lynch (R), D. Valdez (D)]

TECHNICAL BILL

From the Statutory Revision Committee

SIGNED INTO LAW

Description: Removes obsolete child care tax credits and references to them.

HB21-1155 Sales Tax Statute Modifications To Address Defects (Zenzinger (D), Woodward (R)) [Arndt (D), Pico (R)]

TECHNICAL BILL

From the Statutory Revision Committee

SIGNED INTO LAW

Description: Makes numerous technical changes to taxes and fees laws to fix technical errors and remove anachronisms.

HB21-1157 Accurate References For Department of Revenue Tax Administration (Kirkmeyer (R), Woodward (R)) [Arndt (D), Lynch (R)]

TECHNICAL BILL

From the Statutory Revision Committee

SIGNED INTO LAW

Description: Fixes technical errors in the list of taxes the department of revenue administers.

HB21-1158 Special Fuel Farm Equipment Sales Use Tax (Kirkmeyer (R)) [Lynch (R), D. Valdez (D)]

TECHNICAL BILL

From the Statutory Revision Committee

SIGNED INTO LAW

Description: Removes unused definitions and redundant references in sales and use tax exemptions for poultry and livestock and reorganizes the special fuel and farm equipment sales and use tax exemptions so they are in the same spot in law.

HB21-1177 Add Use Tax Exemption To Some Sales Tax Exemption (Moreno (D), Woodward (R)) [D. Valdez (D), Lynch (R)]

TECHNICAL BILL

From the Statutory Revision Committee

SIGNED INTO LAW

Description: Typically when something is exempt from sales tax it is also intended to be exempt from use taxes. There are several exemptions in law which do not have a corresponding use tax exemption that this bill fixes.

HB21-1197 Income Tax Credit For Income Taxes Paid (Kirkmeyer (R)) [Woog (R)]

KILLED BY BILL SPONSORS

AMENDED: Very Significant

Appropriation: None
Fiscal Impact: About $365 million lost revenue at full implementation per year, $1.8 billion over five years in original bill, unknown in amended version

Goal:

  • Cut state income tax rates to 0% for single filers making $20,000 a year or less and joint filers making a combined $40,000 a year or less. Expires after the 2025 tax year.
  • Reduce the amount that anyone can pass through to their taxes in business losses to $250,000 (currently is $500,000) through 2026. A bill that would have limited this cap to $400,000 last year would have brought in up to $147 million in revenue by 2023-24, the non-partisan legislative staff did not analyze the revenue brought in by this change prior to the bill being killed

Description: C corporations can pass through their tax liabilities to individual owners, so the income or loss is part of their personal tax return.

Additional Information: n/a

Auto-Repeal: January 2026

Arguments For:

Bottom Line:

  • Colorado has a regressive income tax system, due to our flat tax rate, tax breaks for the wealthy, and the effects of sales tax. The rich pay a lower percentage of their income than the poor
  • COVID made all of this worse by disproportionately affecting poorer Coloradans economically, while the wealthier among us either prospered or have mostly recovered, the poor face a long hard road just to get back to where they were (which to be clear, wasn’t great)
  • We have multiple other revenue sources coming into the state or potentially coming through bills in this session to help with school spending and transportation spending to backfill any revenue loss due to this bill (we also have a huge federal stimulus coming)
  • We bring in $14 billion in revenue, and the bill now has a mechanism to recover at least part of those losses through increased taxes on wealthier Coloradans we can afford to drop $365 million a year to help those who need it most

In Further Detail: In Colorado we have a regressive income tax system, which means the rich pay a lower percentage in taxes than the poor. This is because we start with a flat tax rate, and there are more lucrative tax breaks for the wealthy than for the poor. This unfairness is compounded by sales taxes, which of course are the same no matter what your income is, but hurt poor people much more. In 2015 those earning $200,000 or more paid an effective total tax rate to the state of 3.9% of their income. Those earning $0-$15,000 paid 6.3%. But people don’t put percentages into the bank account, so even if it was the same percentage the fact remains that you talking about people who in poverty versus people who are most definitely not. COVID just exacerbated this effect. Higher-earning Coloradans were the least likely to lose their jobs due to the pandemic and most likely to be able to work safely from home. Lower-income Coloradans were more likely to lose their job and have been the slowest to recover employment (a trend that is expected to continue through this year). The state estimates that Coloradans making over $60,000 a year are already at pre-pandemic employment levels while those making less than $27,000 a year remain at nearly 18% below pre-pandemic employment. Higher wage earners never even got below 11% levels. This bill helps those folks get back on their feet, truly, not just a one-off but several years of tax relief to help get their finances back in order. Now the state is expected to take in about $13 billion in this fiscal year and completely recover from the pandemic in terms of state revenue next year, as we close in on $14 billion. That is the number to keep in mind when we talk about bringing in $365 million less in revenue per year. We also have enormous amounts of stimulus money coming to the state from the federal government (over $1 billion), that we can use to shore up areas that may be affected by revenue shortfalls. When it comes to our schools, we are already on track to pass a bill in this session that greatly shifts the burden for funding schools from the state to local districts, so we should be able to rapidly make up the money we owe them. Transportation, another bill is looking to add billions in funds to address our shortfalls there (which will be highly regressive by the way, since it is mostly via increased fees on gasoline). So while it is always true that taking away money from the government will cause it to not be spent somewhere, we have multiple avenues to ensure important spending priorities don’t get harmed. On removing tax breaks, the idea that wealthy people just don’t need their hard earned money is not fair to them. Another way to look at our state taxes is that those who make over $200,000 a year support 1/3 of the entire tax burden of the state, while those that make $0-15,000 support just 3%. So the rich are paying. The more money we can allow them to keep in their businesses (remember their business income is being paid on personal taxes) the more they can grow their businesses and create more jobs. Pulling $150 million out of businesses in the state (as Arguments Against suggests) may help us feel better but may also damage the overall economy in the state.

Arguments Against:

Bottom Line:

  • The tax cuts in this bill are not balanced at all with the removal of tax breaks that wealthier Coloradans enjoy (and don’t really need) so as to keep the bill more revenue neutral
  • Pre-pandemic services in Colorado weren’t good enough so getting back to those levels should not be good enough: our teachers are among the worst paid in the nation, we have a multi-billion backlog of transportation needs and billions needed to fund our water plan. We have a behavioral health crisis in the state. Additional revenues from other sources to fill in the hole created by this bill won’t cut it may not be sufficient
  • State spending is already constrained by TABOR and we won’t hit our next TABOR refund until 2023-24 in all likelihood, so we wouldn’t be withholding money the state would have to give back anyway for the most part
  • It would be counterproductive to remove state income taxes but at the same time be forced to slash services the poorest Coloradans depend on

In Further Detail: There is no dispute that we have a regressive tax system and need to fix or ameliorate that. But the way to do it is to shift the tax burden, not lower it. We know from a bill that failed in last year’s session that there are at least $150 million a year in tax breaks to wealthier Coloradans we could remove to make this bill closer to revenue neutral. Because a key assumption of this bill is that pre-pandemic state revenues were fine, and so backfilling with other short-term stimulus money or reallocation of financial burdens will cover it. But we weren’t fine. It’s not just that we owe our schools hundreds of millions of dollars. It’s that our teachers are among the worst paid in the country. We have what amounts to a behavioral health crisis in the state and need massive investments at almost every level of care, including paying our providers more so we have enough of them. Our transportation backlog is a multi-billion dollar one, so we are still likely to be behind even after stimulus money and potential increases in fees. We are billions of dollars behind on our state water plan. The bottom line is that in this growing state we don’t have enough revenue to fund what we need. $14 billion sounds like a crazy number, but it actually isn’t enough. Now we are constrained by TABOR on revenue limits, which the voters have recently affirmed as what they want. So there is an upper point to what we can do. But we need to be at that limit. We aren’t expected to reach TABOR refund levels until at least 2023-24, so TABOR refunds are almost a non-factor in this discussion. We also just lowered the state’s income tax rate without any corresponding tax break corrections. So yes, we should do something to ease the burden of the poorest Coloradans as we recover from the pandemic, but it must be done in a way that doesn’t slash the very services many of them rely on. $365 million is more than the entire budget for the Local Affairs, Natural Resources, Agriculture, Governor’s Office, Labor and Employment, Law, Legislative, Military and Veterans Affairs, Personnel, Regulatory Agencies, and State departments (not combined, individually, though you could combine a bunch of the lowest ones). It’s a lot of money. The negative factor, what we owe our schools, was at $1.2 billion last year. Again, $365 million is a lot of money.

How Should Your Representatives Vote on HB21-1197

HB21-1261 Extend Beetle Kill Wood Products Sales Tax Exemption (Coram (R), Ginal (D)) [Catlin (R), Cutter (D)]

PASSED

Appropriation: None
Fiscal Impact: No change, but letting this expire would bring in an additional $480,000 a year

Goal:

Extend the existing exemption of wood products from trees killed by pine and spruce beetles from sales and use tax through 2026. Was set to expire in July.

Description:

Extends the existing exemption of wood products from trees killed by pine and spruce beetles from sales and use tax through 2026. Was set to expire in July. This exemption has existed since 2008. The estimated revenue impact is around $480,000 a year.

Additional Information: n/a

Auto-Repeal: July 2026

Arguments For:

Bottom Line:

  • Getting dead trees killed by beetles out of our forests serves a huge purpose: making our forests more resilient to wildfire. This exemption is designed to encourage the removal of these trees by making their wood less expensive. The exemption does not cost the state much money and should therefore be continued, in particular because we are running out of the more recent, and thus more attractive for uses other than burning, beetle killed wood which means that the price difference may start to matter more in the future

Arguments Against:

Bottom Line:

  • It’s not at all clear that this exemption is actually doing much of anything. Two-thirds of all wood harvested in this state is sold outside the state, where Colorado sales tax rates are irrelevant. Furthermore, it appears that customers are actually willing to pay more for beetle-killed wood, thanks to distinctive blue staining, in some circumstances where the look of the wood matters, so the idea of making it cheaper doesn’t really help. And the final, killer, reason to ditch this exemption is that we already can’t log enough timber in this state. The US forest service controls most of the land these trees are on and it only allocates a certain amount a year. Harvesters indicate there is more demand for the wood than they can supply.

How Should Your Representatives Vote on HB21-1261

HB21-1265 Qualified Retailer Retain Sales Tax For Assistance (Pettersen (D), Woodward (R)) [Mullica (D), Van Winkle (R)]

SIGNED INTO LAW

AMENDED: Minor

Appropriation: $101,600
Fiscal Impact: Estimated loss of $41.2 million but it depends on how many use the program and if they reach their maximum which depends on increase in dining

Goal:

Continue a temporary program for restaurants and bars to allow them to keep their sales tax revenue instead of depositing it with the state through August. Was set to expire at the end of May.

Description:

Continue a temporary program for restaurants and bars to allow them to keep their sales tax revenue instead of depositing it with the state through August. Was set to expire at the end of May.

The bill also expands the program to include those in the catering industry and those who are food contractors, like airline food, arena and sporting events, schools, hospitals, convention centers, etc.

This program began last November. All participating retailers are capped at $70,000 per month in sales which equates to $2,000 in taxes kept per month. We don’t yet have an exact figure for what has been withheld so far, but the estimate is $35.6 million from somewhere between 5,370 to 6,110 retailers.

Additional Information: n/a

Auto Repeal: August 2021

Arguments For:

Bottom Line:

  • The restaurant industry was one of the hardest hit by COVID and this temporary tax break, created last year, is seen as a great way to provide small amounts of relief to these businesses as they get back on their feet (note that they can get multiple other kinds of relief from both the state and federal government as well). It is super easy to administer and provides immediate impact. Part of the reason for the extension is that this relief is based on economic activity occurring at the business, which we are really just now entering a period where we should see a dramatic spike thanks to better weather for outdoor dining, increased vaccinations, and a likely relaxation of public health orders as more and more Coloradans get vaccinated. In the grand scheme of things it is not an enormous amount of money, especially considering the massive extra cash the state has from last year and the massive federal stimulus windfall of over $1 billion yet to come. It also makes perfect sense to extend this to catering (hit for the exact same reasons as restaurants/bars) and food service contractors.

Arguments Against:

Bottom Line:

  • $6,000 (three more months at $2,000 a month) is just not much for any business and likely won’t make much of a difference. But we’ll be out over $40 million. The effect here is actually pretty similar to TABOR refunds: they are so wide-spread that for the most part they are negligible to most Coloradans who may not even notice they got one but they hit the state budget hard. That’s not to say we shouldn’t spend $40 million in this industry, just that it should be more targeted so we can give out higher awards to individual businesses and get more bang for our buck

How Should Your Representatives Vote on HB21-1265

HB21-1292 Report Revenues From Sports Betting Activity (Story (D), Hisey (R)) [Baisley (R), Amabile (D)]

PASSED

AMENDED: Minor

Appropriation: None
Fiscal Impact: None at state level, may result in higher property taxes in affected counties

Goal:

Obtain sports betting activity information from licensees so as to properly value their associated casino property in the three gambling cities of the state (this is already done for other approved gambling in these cities).

Description:

Require monthly and annual reports of revenues and expenses from sports betting, aggregated by the city the license is in. If there are less than 3 licensees in any of the gambling cities (all sports betting licenses are based in Central City, Black Hawk, and Cripple Creek), the data must be aggregated with data from another city before being posted online publicly to protect privacy of licensees. Data must include sub-totals from on-site and online operations.

If the aggregated data results in a property valuation the casino or other taxpayers believe is incorrect, the taxpayer can submit additional information to the county assessor, subject to strict confidentiality requirements.

This requirement already exists for limited gambling activity in Central City, Black Hawk, and Cripple Creek.

Additional Information: n/a

Auto-Repeal: n/a

Arguments For:

Bottom Line:

  • Sports betting revenue represents tangible elements of real property and therefore must be considered for property tax values in the gaming cities where it is housed, in the exact same way that the other gambling activity in these cities is already considered. That’s what the bill does, allowing for privacy in the cities where there is less activity and a mechanism to protest valuation if the resulting aggregation is unfair

Arguments Against:

Bottom Line:

  • This situation is actually quite different from the other gambling taking place because it is actually not occurring in these three cities, for the most part, and is being done by third-party companies like BetMGM or DraftKings, etc. So it is not appropriate therefore to treat it just like the gambling that occurs on-premise in these three cities

How Should Your Representatives Vote on HB21-1292

HB21-1308 Property Tax Administrative Procedures (Moreno (D), Priola (R)) [Gray (D), Larson (R)]

KILLED BY BILL SPONSORS

Appropriation: None
Fiscal Impact: None

Goal:

Add a month into the entire timeline for property tax valuation protests, which gives more time for property holders to study their valuation before being required to protest or miss the deadline. Require any systematic errors discovered in the course of an appeal to be corrected for everyone affected, not just the appellant, require tax assessors to include estimated tax owed in the upcoming year in annual notices (right now is optional), and require a public hearing prior to any changes to property tax manuals or procedures.

Description:

Expands the timeline for all property tax protests by one month. So for property holders to protest valuation from a deadline of June 1st to July 1st. This also pushes back deadlines for hearing commencement from June 15th to July 15th and that notices for the hearing must be delivered by July 30th instead of June 30th. Notices of denial of change must occur before the last regular working day in July instead of June for real property and August 10th instead of July 10th for personal property. All hearings of appeal must be complete by September 5th instead of August 5th. All of this pushes back the deadline for assessors to complete their annual work from August 25th to September 25th and the notice for the annual public meeting the county board must undertake (already required by law) to review the assessment of all property rolls from July 1st to August 1st.

Requires any assessor that finds through the appeals process that they made a systematic error to not only correct the assessment of the person making the appeal, but all similar properties with the same error.

Requires all county tax assessors to include in annual notice of valuation to property holders an estimate of the taxes or range of taxes owed for the current property tax year (currently this is optional and up to county commissioners to decide).

Requires a public hearing prior to the property tax administrator proposing any change to manuals, appraisal procedures, instructions, or guidelines for determining property value in Colorado. At least two weeks prior to the hearing the administrator must publish a notice of the proposed changes, including the date, place, and time of the hearing, and either the terms or the substance of the proposed change or a description of the subjects and issues involved.

For notification, the administrator must keep a list of all people who have expressed interest in being notified with e-mail addresses. A person on the list can request a copy of the notice via mail, but must then pay for postal expenses. Administrator must consider all public input, including any petitions related to these materials, but the decision is ultimately up to them.  All of this must start in 2022.

Additional Information: n/a

Auto-Repeal: n/a

Arguments For:

Bottom Line:

  • The timing of the appeals process is still tight despite recent changes. Expanding it by a month not only helps property owners but also may actually cut down on the number of appeals since right now some folks may be appealing just to preserve their right to do so rather than because they have studied the assessment and believe it is wrong. We absolutely should be fixing known errors in assessments, so requiring that to be done when systematic errors are made is a no-brainer. It is also more transparent to provide the actual taxes that would be owed rather than just the valuation as the property owner likely views it more through the lens of how much they will need to pay rather than how much the property is worth. So making that mandatory rather than optional should help more property owners have a better understanding of exactly what the valuation means. Property tax valuation is extremely important to everyone in Colorado, as the tax funds fuel a lot of local government, including school spending, so the public and any interested party should absolutely be able to weigh in on these matters.

Arguments Against:

Bottom Line:

  • This risks backing up the process too much and we may not see the drop in appeals hoped for, as it is possible that the folks who are most engaged in this process will continue to appeal anyway, since it is a no-lose proposition (the worst thing that can happen is the state says no). For the hearing requirement for changes, the administrator is not making sweeping decisions without consulting key stakeholders, that’s just how state government works. So we don’t have to worry about a decision triggering rate changes. Leave all of this to the experts

How Should Your Representatives Vote on HB21-1308

HB21-1311 Income Tax (Hansen (D), Moreno (D)) [Sirota (D), Weissman (D)]

PASSED

AMENDED: Moderate

Appropriation: $68,041
Fiscal Impact: $13 million to the state this year, $63.2 million next, $104.9 the year after, with slightly increasing net positive impact into the future

Goal:

Make multiple changes to personal tax laws (and some related to business tax collection) as well as expand the earned income tax credit and create a state-level child tax credit, with a net of $13 $13.2 million to the state this year, $63.2 $39.5 million next, and $104.9 $57.2 million the year after. The earned income tax credit is expanded from 15% to 20% , with a temporary boost to 25% in 2023-25, and the new child credit amounts depend on if the new temporary federal child credit laws are made permanent. The rough range will be $180 to $1,200 per child depending on income, with a cap at $60,000 of income for individuals and $85,000 for couples. New revenues come from capping itemized expense deductions for those earning more than $400,000 at $30,000 for individuals and $60,000 for couples, eliminating the capital gains tax exemption, making the change last year that reset pass-through deductions for certain business to individual tax returns back at 2016 levels permanent (federal law that this is based on changed in 2017), capping 529 plan tax deductions at $15,000 $20,000 for individuals and $30,000 for couples, removing a temporary business lunch tax deduction (again a federal change that only is for this year), and changing how complicated business structures must consider if they are liable for Colorado taxes (in favor of making them more liable).

Description:

The bill nets out to $13 $13.3 million this year, $63.2 $39.5 million next year, and $104.9 $57.2 million in 2023-24 in added revenue to the state.

First we’ll discuss the decreases to state revenue through new or expanded tax credits. This will cost the state $81.1 million this year, $163.3 $187.8 million next year, and $164.5 $213.5 million in 2023-24.

Increases the earned income tax credit from 15% to 20% of the federal earned income tax credit with a temporary increase up to 25% from 2023-25 before it goes back to 20% in 2026. The EITC is available to taxpayers with incomes falling below certain thresholds. In 2021 those are $15,980 (single) or $21,920 (couple) with zero children, $42,158 or $48,108 with one child, $47,915 or $53,865 with two, and $51,464 or $57,414 with three or more. Benefits also range depending on number of children, ranging from $543 to $6,728. The Colorado portion of this is a percentage of that benefit, so right now it is $81.45 to $1,009.20, this bill increases it to $108.6 to $1,345.6. This will cost $24.2 million this year, $48.7 $73.2 million next year, and $48.9 $97.9 million in 2023-24. When the credit returns to 20% the full year fiscal impact will be more like $50-$55 million a year.

The Colorado version of the federal child tax credit was enacted with the provision that it could only become active if Congress passed legislation allowing states to collect sales tax on sales made out of the state. This bill repeals that requirement and makes the tax credit active. The federal child tax credit is available to people filing jointly at under $400,000 or singly at $200,000 but the state credit only available at $75,000 (single) or $85,000 (couple). It was $2,000 per child under 17 in federal law but has temporarily been raised to $3,600 for children under six, which for the state, is the only age we care about because this bill only applies to children under 6. If the total credit is more than what the taxpayer owes they could take a refundable credit of $1,400 per child (the $2,000 is not refundable, so you don’t get money back if you zero out your taxes) in federal law until this year but now the amount is fully refundable, so you get it all regardless. This is temporary, and the reason the old rules are important is that the bill is written so that if these new standards become permanent, the state percentages are reduced. For now, the Colorado version of this is 30% of the federal credit for the lowest income bracket (under $25,000 for single filers and $35,000 for joint filers), 15% of the federal credit for the middle bracket ($25,000 to $50,000 for singles and $35,000 to $60,000 for joint), and 5% of the highest bracket ($50,000 to $75,000 for singles and $60,000 to $85,000 for joint). So that’s $1,080, $540, and $180 per child. If the changes in the federal law do not become permanent and we go back to $2,000, then the percentages in the bill double to 60%, 30%, and 10% ($1,200, $600, and $200). This will cost the state $53.4 million this year, $107.4 million next year, and $107.9 million in 2023-24. That is assuming the federal child tax credit increase is temporary, so it uses the higher numbers per child.

There are two more smaller decreases to state revenue. The first is a change to social security deductions. Right now taxpayers are capped in how much they can deduct from their social security income at $20,000 from age 55 to 64 and $24,000 for those 65 and older. The bill removes these caps. This would cost $3.4 million this year, $7 million next year, and $7.4 million in 2023-24. The other change is a new temporary income tax credit to businesses that convert to employee ownership (either a worker owned co-op, an employee stock ownership plan, or an employee ownership trust). This credit is equal to 50% of the costs of the conversion with a cap of $25,000 unless conversion is made to a stock ownership plan in which case the cap is $100,000. This will cost the state $100,000 this year, $200,000 next year, and $300,000 in 2023-24. The bill sets a maximum single year cap of $10 million for these credits and does allow taxpayers to “reserve” their credit (obviously they must later prove they deserve it). Otherwise it is first-come, first-serve. The credit is fully refundable (so again, if the business has less income than the tax credit, they get paid the difference in a refund). State is required to conduct statewide outreach efforts to minority owned businesses about this tax credit. Credit repeals in 2033.

Next we’ll discuss the increases to state revenue through removed or shrunken tax credits or increased tax liability. This will bring in $94.1 $94.4 million this year, $226.5 $227.3 million next year, and $269.4 $270.7 million in 2023-24.

Caps the amount people who earn more than $400,000 (joint or individual filing) can use in itemized deductions at $30,000 for individuals and $60,000 for couples. Itemized deductions are certain expenses that tax law allows you to deduct from your income, one of the most common are mortgage interest, medical expenses, and charitable donations (that’s what they mean when they say your donation is tax deductible  but there is a whole series of business related things that can be deducted. Some people will just take the standard deduction you are allowed by the government instead of trying to itemize. This is $12,400 for individuals and $24,800 for couples. In federal law, there are currently no limits on how much someone can itemize their deductions other than a cap of 60% of their income (there are limits on individual deductions, like mortgage interest or state and local tax income). This will bring in $59.6 $60.8 million this year, $121.1 $123.7 million in 2022-23 and $125 $128.3 million in 2023-24. Repeals in 2031.

The bill eliminates the current state tax deduction for capital gains income for real or tangible personal property acquired after May 9, 1994, and held for at least 5 years, leaving only property acquired before May 9, 1994, as eligible except for agricultural property purchased before June 4, 2009. Basically right now there is no state capital gains tax. This is what you pay on the amount an asset gained in value while you held it, like a house for instance. If you bought a house for $200,000 and sold it for $400,000, your capital gains is $200,000 (there are other ways to reduce this based on improvements made, etc.). This will bring in $10.1 $9.4 million this year, $20.6$19.2 million next year, and $21.3 $19.9 million by 2023-24.

Makes the pass-through tax change passed last year that just applied to 2021 and 2022 permanent. For taxpayers whose adjusted gross income exceeds $163,300 for single filers or $326,600 for joint filers, the provision in the 2017 federal tax bill that allowed pass-through businesses and C corporations to deduct 20% of that pass-through income was repealed at the state level for those two years. So in essence it was a 1% tax cut for anyone who qualifies for Colorado taxes, which the bill last year temporarily reversed and this bill extends through 2025 (which is when the federal change expires). This law was part of the massive federal tax law changes in 2017 and expires in 2025. This extension will bring in an additional $37.9 million in 2022-23 and $77.6 million in 2023-24.

Caps tax deductible contributions to 529 college-savings plans at $10,000 for individuals and $15,000 $20,000 for couples per person and $30,000 for couples. This is lower than the same as higher than the federal level, which is $15,000 per person (just the annual gift tax amount limit), which means for a couple you could do $30,000 if you filed separately. In practice that may mean that the $15,000 limit for couples stays roughly the same as federal law (state law currently has no cap at all). The limits are tied to the percentage change in average costs of tuition and board at all statewide institutions of higher education. State is to examine a representative sample of information provided by CollegeInvest (which runs 529s in the state) to look for people breaking this law. Must report to the legislature each year. This will bring in $5.4 $5.2 million this year, $11.1 $10.7 million in 2022-23 and $11.6 $11 million in 2023-24.

Removes a federal (default in Colorado is to follow federal tax deductions unless state law says otherwise) business lunch tax deduction that only applies to 2022. This was a temporary increase in the deduction from 50% of the amount spent to 100% that was part of COVID relief. This will bring in $3.5 million this year and $3.5 million next year (our fiscal year runs July to June, so 2022 occurs in two fiscal years).

On tax liability, the bill makes changes to how companies are liable for business taxes in the state. Right now the rule on if multiple affiliated corporations need to pay Colorado income taxes is the so-called “three of six rule”, which is that you must meet 3 of 6 different conditions. This bill creates a new test for multiple affiliated corporations under a unitary business. These affiliated corporations must file a single tax return with the income of each member corporation all added together. This total income must then be apportioned by state to determine Colorado tax liability. Unitary business is defined as a single economic enterprise made up of either separate parts of a single C corporation or an affiliated group of C corporations that are sufficiently interdependent, integrated, and interrelated so as to provide a synergy and mutual benefit to creates significant value to each of the parts. In addition, the bill changes how that apportionment of income should work, right now a business must have a significant economic presence in the state, but the bill changes that so if only one of the affiliated businesses has a significant economic presence, all of them count. Businesses must count income for any sales in Colorado, regardless of if the business has a significant presence or not. Finally, right now insurance companies with less than half of their revenue coming from premiums don’t pay income tax, they instead pay an insurance premium tax. The bill changes this so they pay income tax. The insurance premium tax is 1-3% depending on various factors and mostly goes to the general fund. This will bring in $9.7 million this year, $20.2 million in 2022-23 and $21.2 million in 2023-24.

It also cracks down on tax avoidance. In those same combined groups, all entities incorporated in foreign jurisdictions for tax avoidance must be counted as well. A company can overcome the assumption that the foreign incorporation is for tax avoidance if it can prove it meets federal economic substance doctrine (essentially valid economic reasons). This will bring in $5.8 million this year, $12.1 million next year, and $12.7 million in 2023-24.

Additional Information:

Requires CollegeInvest (which runs 529s) to provide the state each year with a report containing the information of all contributions to 529s, including social security numbers, and all unqualified distribution amounts (if you spend money out of a 529 on a purpose that is not allowed, you have to pay tax on it) and the reason for the unqualified distribution.

Due to TABOR, the bill also requires increases of transfers from the general fund to the state education fund of $6.6 $6.7 million this year, $16.1 million next year, and $19.2 $19.3 million in 2023-24 (has to do with taxable income levels).


Auto-Repeal: 2031 for employee-ownership transition credit and cap on itemized deductions

Arguments For:

Bottom Line:

  • It is critically important to first note that our tax system in Colorado is regressive: the rich pay a lower percentage in taxes than the poor. This is because the income tax rate is flat, but there are more lucrative tax breaks available for the wealthy. This is compounded by sales taxes which hurt poor people more. The effective tax rate in 2015 for those earning $200,000 or more was 3.9%. For those earning $0-$15,000 it was 6.3%. And those are just percentages! $1,000 means a lot more to that bottom group than the top
  • Federal tax pass-throughs benefit business owners and no one else. People making more than $1 million a year are getting 44% of the benefits from this law and people making less than $200,000 are getting less than 25% (yes that’s the lowest bracket considered). We already temporarily reset this pass-through to law as it existed prior to 2017, this bill just makes that permanent
  • For capital gains taxes, 99% of the benefits of this credit go to the wealthiest 1%, and capital gains is mostly about selling stocks and selling property
  • For the itemized deductions, this is the playground for the wealthy and a huge part of how they avoid their fair share of taxation. At the federal level, in 2017, 90% of those earning over $500,000 itemized and 80% of those earning $100,000-$500,000 did, versus 43% of those in the $50,000-$100,000 bracket, 20% in the $30-50,000 bracket and 7% in the under $30,000 bracket. And you’ll never guess what happens when you look at the itemization amount. The average for those in the $100,000-$500,000 bracket was just under $32,000 (so close to the cap in this bill). The average for the over $500,000 bracket? $248,000 dollars
  • Business tax avoidance is a similar story: we are trying to ensure people who can afford to do so are paying their fair share and not avoiding taxes through a variety of schemes only available to them
  • For what we are spending this on, the earned income tax credit is one of the most effective tools in our battle against poverty. Numerous studies have shown it boosts work effort, particularly among single mothers. On the federal level this credit has helped millions of families escape poverty
  • The child tax credit operates in a similar manner but it focuses more intensely on families with children. It is hard to overestimate how expensive children are, and the overall societal benefits to keeping children out of poverty are immense. Increased health and education outcomes lead to better paying jobs and a better future
  • We also must consider two different factors that are outside the scope of just this bill. That expiring pass-through deduction this bill makes permanent will cause a $58 million hole in our expansion of the earned income tax credit, because it was expanded last year and without this bill, in 2022-23 we are going to come up short and have to tap other funds
  • The tax cut votes approved last year, which was a uniform cut so actually made our code more regressive, will cost the state $150 million a year in revenue. In combination with HB1312 the extra revenue will fill that void too

In Further Detail: Before discussing the individual tax credits, an important fact about Colorado: we have a regressive income tax system, which means the rich pay a lower percentage in taxes than the poor. This is because we start with a flat tax rate, and there are more lucrative tax breaks for the wealthy than for the poor. And this is all before we even consider this additional federal tax break. This unfairness is compounded by sales taxes, which of course are the same no matter what your income is, but hurt poor people much more. 2015 is the last year for which we have complete data, and those earning $200,000 or more paid an effective total tax rate to the state of 3.9% of their income. Those earning $0-$15,000 paid 6.3%. But people don’t put percentages into the bank account, so even if it was the same percentage the fact remains that you talking about people who in poverty versus people who are most definitely not. With that in mind let’s talk about each of these three tax credits individually. The federal tax breaks for pass-through income firstly benefits business owners and no one else. Freelancers of course can form their own personal business, and many legal, consulting, and accounting firms are set up this way. So are a lot of hedge funds and private equity groups. But on the whole, people making more than $1 million a year are getting 44% of the benefits from this law and people making less than $200,000 are getting less than 25%. Think about what it means that we aren’t even thinking about breaking down lower levels of income. It’s also pretty important to remember that big chunks of this are simple continuations of resets to previous law. For the capital gains reduction, 99% of the benefits of this credit go to the wealthiest 1%, and capital gains is mostly about selling stocks and selling property. Neither has much to do with creating jobs. The itemized deductions cap is also pretty simple. If you are earning more than $400,000 a year in Colorado you are wealthy. Sorry, there’s no other way to say it. For the most part itemized deductions are the playground of the wealthy. Those basic mortgage interest deductions and charitable deductions frequently don’t add up to the standard deduction for most people. In 2017 just 31% of people itemized their deductions. But 90% of those earning over $500,000 itemized and 80% of those earning $100,000-$500,000 did, versus 43% of those in the $50,000-$100,000 bracket, 20% in the $30-50,000 bracket and 7% in the under $30,000 bracket. And you’ll never guess what happens when you look at the itemization amount. The average for those in the $100,000-$500,000 bracket was just under $32,000 (so close to the cap in this bill). The average for the over $500,000 bracket? $248,000 dollars. On average. This is a key part of how the wealthiest Americans leverage the tax code to avoid paying taxes (mostly has to do with business-related expenses and activities too, not massive gifts to charity). So yes, it is perfectly appropriate in our regressive tax state to remove this tool for the wealthy to avoid paying their fair share. If you earn less than $400,000 this won’t affect you at all and even if you earn more, you still get to lower your tax burden by $30,000 for individuals or $60,000 for couples. You’ll survive. In fact, that is pretty much the theme for the entire bill (529 contributions fall into a similar category here, if you can afford more than $15,000 a year you’ll be just fine). The business taxes are a similar story, essentially we just want people and businesses paying their fair share. Doing so frees up money we can use for other purposes. The earned income tax credit is one of the most effective tools in our battle against poverty. Numerous studies have shown it boosts work effort, particularly among single mothers. This in turn helps get people off welfare programs. On the federal level this credit has helped millions of families escape poverty. The child tax credit operates in a similar manner but it focuses more intensely on families with children. It is hard to overestimate how expensive children are, and the overall societal benefits to keeping children out of poverty are immense. Increased health and education outcomes lead to better paying jobs and a better future. This is a multi-generation tax credit. We also must consider two different factors that are outside the scope of just this bill. The first is a bill that passed last year, the one that started the temporary change in pass through deductions this bill in essence makes permanent. That bill also expanded the earned income credit, from 10% to the current 15% but it’s funding structure meant a $58 million loss in 2022-23. So part of the “excess” revenue from this bill is going to pay for that expansion. The rest, in combination with HB1312, is paying for the tax cut votes approved last year, which will cost the state $150 million a year in revenue. Again remember: we are a regressive tax state. The tax cut last year made that worse by a uniform tax reduction for everyone. This bill helps right the balance a bit by restoring (in combination with HB1312) the lost revenue on the backs of the wealthy instead of the poor so the net effect from last year’s ballot measure and these two bills is a more progressive tax system. Finally, remember that TABOR puts revenue caps on what the state can bring in every year. If we exceed the caps (and the estimate is that we would in 2022-23 thanks to these two bills), taxpayers get money back. As for the trickle-down theory of economics Arguments Against leans into, we’ve spent 40 years trying that. It doesn’t work. People pocket the extra money and spent it on yachts, not more jobs.

Arguments Against:

Bottom Line:

  • Wealthy people deserve their hard-earned money and the idea they don’t need it isn’t fair to them. Another way to look at our tax code is that those who make more than $200,000 support 1/3 of the entire tax burden of the state while those that make $0-$15,000 support just 3%
  • The idea behind a lot of these credits is to help fuel the engine of our economy: business owners who create jobs. The more money they have in their businesses the more they can grow and create more jobs. This applies to pass-through income and itemized deductions because many small businesses owners’ personal and business finances are quite entangled
  • The itemized deduction change could also negatively affect charitable giving
  • Pulling $260 million out of businesses as we try to recover from the pandemic may damage the state
  • We just expanded the earned income tax credit, we should give that time to actually work before expanding it again
  • We don’t need new revenue to fund the child credit, the ability to collect sales tax on items shipped out-of-state should (and was the original intent of the legislature, the law was just sloppily written and didn’t consider the Supreme Court would pave the way instead of Congress)

In Further Detail: The idea that wealthy people just don’t need their hard earned money is not fair to them. Another way to look at our state taxes is that those who make over $200,000 a year support 1/3 of the entire tax burden of the state, while those that make $0-15,000 support just 3%. So the rich are paying. And the idea behind the pass-through tax credit is to help the engine of our economy, business owners who create jobs. The more money we can allow them to keep in their businesses (remember their business income is being paid on personal taxes) the more they can grow their businesses and create more jobs. A similar story can be told about itemized deductions, a lot of people structure their expenses around the idea that they can be itemized. Beyond the business implications (and yes, it gets complicated for small business owners who mix together a lot of their personal finances with the business finances), another casualty of this cap may be charities, who rely pretty heavily on the tax-deduction concept in soliciting donations. So it has to be a balancing act between credits targeted to help the poor and those targeted to help create more jobs for everyone. Pulling $260 million out of businesses in the state as we try to recover from the pandemic may also damage the overall economy in the state, just as much or possibly more than cutting government programs. For the earned income tax credit, as Arguments For notes, we literally just expanded that last year, from 10% to 15%. Give the expansion a chance to work before we go back for more. The child tax credit should be implementable without these extra funds, the original concept in the law was that the credit would come into being once we were able to use sales tax on items delivered out-of-state. But it was poorly written and required Congress to pass a law. Instead a Supreme Court ruling has paved the way for this extra sales tax collection. So simply implement the tax without this added funding.


Bottom Line:

  • This is a good time to revisit the entire child tax credit idea and get rid of it, using the savings to fund our budget gaps and educational needs. Adults with children are already given great advantages in federal and state tax codes and we don’t need to be piling on more money to lower income families who have lots of children. Some form of self-discipline and reliance needs to be in play.

How Should Your Representatives Vote on HB21-1311

HB21-1312 Insurance Premium Property Sales Severance Tax (Hansen (D), Moreno (D)) [Weissman (D), Sirota (D)]

PASSED

AMENDED: Minor

Appropriation: $412,642
Fiscal Impact: About $114 million this year, $134 million next year, not estimated going forward but will continue to rise slightly into the future

Goal:

Make multiple changes to business tax laws that net out to about $114 million in revenue to the state this year and $134 million next year. This includes losing about $19 million a year by expanding the personal property exemption for businesses from $7,900 to $50,000 (state is to cover all local government lost revenue due to change). For new revenues, the bill requires insurers to have at least 2.5% of their domestic workforce in the state to qualify for an existing 1% tax break by 2024, ends an exemption for non-retirement plan annuities issued by insurance policies, requires sales tax on a few items not previously required by law, removes the portion of sales tax vendors are allowed to keep for those who earn more than $1 million a month, requires any costs that go to reducing severance taxes for oil and gas companies to be directly paid by the company, and phases out tax breaks for coal companies, directing all of those extra coal revenues to the existing just transition fund.

Description:

The bill nets out to $113.6 million-$115.5 million this year and $131.7 million-$135.5 million next year in added revenue to the state.

The bill makes one expansion of currently existing tax exemptions. Right now businesses are exempt from personal property taxes if the property is worth less than $7,900. The bill increases that to $50,000 and then sets it to adjust for inflation every two years. The state is required to reimburse local governments for their losses due to this change (each county must calculate and report its lost revenue to the state every year). This will cost the state $18.9 million this year and $19 million next year.

Currently insurance policies underwritten by insurers with a regional office in Colorado are taxed at a rate of 1% on premiums instead of 2%. The bill adds an additional requirement to qualify for this lower level, requiring that the company have at least 2.5% of their domestic workforce in the state. This is phased in, with the 2% requirement reminaing for 2022, then 2.25% for 2023 and 2.5% for 2024. This will bring in $60.5 million this year and $64.7 million next year. The bill also ends an exemption for insurance policies issued in conjunction with an annuity plan if the plan is a deposit-like contract that do not incorporate mortality or morbidity risks. Other annuities purchased in conjunction with a qualified retirement plan, a 401(k) or individual retirement plan remain exempt. This will bring in $55.3 million this year and $59.2 million next year.

Requires sales tax on several new items, including mainframe computer access, photocopying, and packing and crating of goods. Codifies into law already existing practice of treating digital goods as tangible property that must be taxed. This would include videos, music, and e-books. This will add $9.5-$11.6 million this year and $10.7-$14.5 million next year. Vendors also get to keep a portion of the taxes collected if they pay the state on-time, current law is 4% with a maximum of $1,000 per month. The bill does not allow anyone with taxable sales of more than $1 million a month to keep any of the taxes at all. This will bring in $7.4 million this year and $15.6 million next year.

Changes the amount of transportation, manufacturing, and processing costs oil and gas companies are able to deduct from severance taxes. Right now they can deduct any of those costs no matter who paid for it, the bill requires that any deducted costs be directly paid by the taxpayer. There is no estimate for how much additional revenue this will bring in.

Currently the first 300,000 tons of coal produced in each quarter are exempt from severance tax and there is a 50% tax credit for coal produced from underground mines and from lignite rock. The bill phases out both exemptions, decreasing the 50% by 10% a year starting in 2021 until it reaches 0 in 2026 and reducing the tonnage by 60,000 tons a year until it reaches 0, also in 2026. All increases in severance tax from these changes go to the just transition fund, which provides money to communities and workers transitioning away from the coal industry. The effect of this is only measured for the first two years, but it is $180,000 in year one and $600,000 in year two.

Additional Information: n/a

Auto-Repeal: n/a

Arguments For:

Bottom Line:

  • The insurance industry is one of the most profitable industries in the country and the state auditor has found this tax credit is not working as intended by bringing more jobs to the state. So the bill simply adds a jobs requirement. To the extent insurers “leave” because they no longer qualify, they obviously won’t be taking very many jobs with them
  • The annuities exemption has turned into a tax shelter instead of its intended purpose of promoting retirement accounts, the bill simply restores the intended purpose
  • Sales tax changes are mostly about keeping up with the times, except for the vendor fee cap. For that, any company that brings in $1 million or more a month in sales doesn’t need that $10,000
  • For oil and gas, this is in response to a 2016 state supreme court decision that widened what these companies could claim. The bill simply restores the concept of only direct costs the company paid for being deductible
  • Part of the revenue goes to help small businesses, who get a big boost in the amount of property they can exempt, to the tune of $19 million a year. The bill ensures no local governments will be hurt by this change
  • The rest, in conjunction with HB1311, goes to pay for the tax cut approved last year by the voters. We have a regressive tax system in this state and flat across the board tax cuts makes that worse

In Further Detail: Much of the new revenue in this bill is simply cleaning up tax credits that aren’t doing what they are supposed to and clarification around sales taxes. For insurers, the insurance industry is one of the most profitable industries in the entire country, and dangling out the 1% break to try to get regional HQs here in Colorado simply isn’t working as intended to bring jobs into the state (this according to the state auditor). So the bill simply changes this to require an actual commitment by an insurer to employ Coloradans to get the extra 1% break. Any insurers that “leave” the state due to this aren’t going to be taking many jobs with them or they would still qualify for the break. The annuities exemption is another one that simply isn’t working as designed. It was supposed to promote retirement annuities but has instead twisted into a tax avoidance scheme. Note how much money the simple change of just allowing retirement funding plans to get the exemption brings in. The sales tax changes are frankly just keeping up with the modern world and for the vendor fee, someone bringing in over $1 million a year in sales doesn’t need help in tracking and paying their sales tax. In both of these cases we are talking about extremely wealthy companies that don’t need the added help the tax code is currently giving them. For the severance tax changes to oil and gas, this is in response to a 2016 state supreme court ruling that greatly expanded the definition to include costs that weren’t directly paid by the taxpayer. That is obviously not the intent of the law, and this bill just clarifies that only direct costs are deductible. Part of the revenue generated by all of this will go to helping small businesses who will be able to exempt even more personal property from taxation. The bill ensures that no local governments will bear the brunt of this change, all of the money will be paid for by the state (from part of the revenue brought in by this bill). The rest of the “excess” revenue, in combination with HB1311, is paying for the tax cut votes approved last year, which will cost the state $150 million a year in revenue. It is worth briefly noting that our tax system is regressive, which means the rich pay a lower percentage in taxes than the poor. This is because we start with a flat tax rate, and there are more lucrative tax breaks for the wealthy than for the poor. So when we lower taxes on an across-the-board rate like was done last year, that actually makes the system more regressive. This bill, along with HB1311, helps restore some of the lost balance. Remember that because of TABOR, the state has a revenue cap and if it hits that cap it has to return the excess money. This bill doesn’t change the cap at all.

Arguments Against:

Bottom Line:

  • It seems almost certain that some insurers will not meet the new 2.5% requirement and move their regional HQs out of the state, which would cost jobs, even if it not a lot in the grand scheme of things that is still someone’s job
  • The vendor fee is supposed to cover administrative costs, thanks to how complicated sales taxes have become those may actually be higher for bigger businesses who should not be punished for being successful
  • We don’t need to do anything to “fill” the revenue loss from the voter approved tax cut last year. The voters said they thought they should keep more of their money and pay less to the state in taxes. It’s just that simple

In Further Detail: The change to the insurance tax break will almost certainly cause some regional HQs to leave the state, taking jobs with them. The 2.5% requirement means we aren’t talking about wide scale job losses but tell that to the people who may lose their jobs because of this change. For the sales tax change, actually a big business is going to have a much more complicated job of keeping up with sales tax requirements because thanks to the legislature they now have to track sales tax in all of the jurisdictions across the state. That is the original point of the vendor fee, it isn’t some bonus or pat on the head for vendors, it is supposed to cover their administrative costs in collecting sales tax and properly distributing it to governments. This increasingly means governments all over the country, as Colorado is not the only state jumping on the chance to bring in more sales tax revenue thanks to the Supreme Court ruling that allows collection of sales tax on anything delivered into the state, regardless of where the business selling the item is located. So it is only fair to these big businesses to give them their administrative costs too, otherwise we are simply punishing them for being successful. This bill is the one of the two (along with HB1311) that generates the most excess revenue so it is really worth talking about what exactly the voters did last year. They said we think we should pay less taxes. They didn’t say anything about redistributing the tax burden onto the wealthy or businesses. So there is no “need” to fill any revenue holes. The state has a $30 billion budget, we can live without the $150 million “lost” thanks to the voters.

How Should Your Representatives Vote on HB21-1312

HB21-1322 Gasoline And Special Fuel Tax Restructuring (Pettersen (D)) [Snyder (D), Titone (D)]

PASSED

AMENDED: Minor

Appropriation: None
Fiscal Impact: None

Goal:

Change the way excise taxes on fuels are collected by moving from a system that allows them to be deferred three times down the supply chain to requiring it to be collected at the first distribution point (to be remitted to the state). For exempt fuels, the bill also allows distributors to pass the burden of collecting rebates from the state (if such a situation occurs) on to the exempt entity.

Description:

Removes the ability to delay collection of gasoline excise tax on importation and distribution. Right now this can be delayed up to three times as the gasoline comes into the state. The bill changes this so that the tax must be collected immediately when the gasoline first is acquired, sold, imported to, or removed from any terminal in the state. Terminal operators must verify that someone receiving gasoline from a terminal is either a licensed distributor or exempt from taxation and if the person is neither, the operator must collect the excise tax due on the gasoline. This makes the operator liable for the tax, so if it isn’t deposited with the state properly they are the ones who get in trouble. For exempt taxes, the complication here, which doesn’t really change in the bill, is that it isn’t always known when the gasoline is sold that it will end up with a tax exempt entity. So in cases where that does ultimately occur, distributors must apply to the state for a refund. The distributors who collect that tax at the first point can sell the fuel down the line with the tax included, which includes to exempt entities which would require the exempt entity to get the refund from the state (right now the burden on getting refunds is entirely on distributors).

Removes requirement that distributors hold surety bonds and requires state to refund all such bonds by next April.

Clarifies that the 2% allowance on sales taxes collected (that the collector gets to keep) applies even if the terminal is out-of-state. Clarifies when the tax is imposed depending on the fuel type. Clarifies that airplane gasoline is exempt from the excise tax. Clarifies that removal of fuels by a licensed exporter for delivery to another state is exempt from the excise tax. Clarifies that for any gasoline that the distributor is claiming is exempt from the tax (there are other exemptions already in the law) the burden of proof is on the distributor to prove exemption.

Lots of language clean-up and definition changes that do not affect current practice.

Additional Information: n/a

Auto-Repeal: n/a

Arguments For:

Bottom Line:

  • This bill has absolutely no impact on the state’s revenues—so nothing about this bill is going to result in more or less money coming into the state. The biggest issue is that the software that supports the ability to delay collection of this tax is outdated and not upgradeable. So we cannot really keep the current system into the future, which actually makes it possible to make a change that will greatly simplify the entire system and bring us in line with most of the rest of the country by collecting the tax at just one point in the system rather than three. Much of the rest of the bill is simply putting into law current practice. As for the changes to the industry, that’s life in the business world. Things change all the time and businesses must adapt. Sometimes that requires changes to how they operate. The fact that this system exists just fine in 30 other states in the country that collect this tax at the first point indicates that the argument against this bill isn’t so much rooted in impossibility as in discomfort with changing the way “we’ve always done things” (in fact we are basically the only state that does things the way we do right now). The bill contains multiple ways for distributors to negotiate terms in their contracts to alleviate the cash flow burdens. As for the notion of instead paying for a new custom system, the problem is that we are either going to have build it ourselves (likely millions of dollars and given how complicated software development can go, could be tens of millions, just look at what happened with the state unemployment software) or get another third party vendor who could pull the rug out from under us like our current vendor did. Because if we are the only state doing things this way, it is not a lucrative business for a vendor. Software is complex and ever changing

Arguments Against:

Bottom Line:

  • The problem with this shift is that it is putting all the burden on distributors when it comes to collection and cash flow. Right now the distributors can push the taxation downstream, much closer to when they actually get paid by their end user. This is particularly true for distributors further down the distribution tier. By putting the taxes up front, the cost of those taxes gets passed down the entire chain from the very beginning. In addition, the way the exemptions work, if gasoline was actually exempt later, distributors get a rebate from the state later on, and so have to wait to get that money back. The only way to square that is to expand credit and tighten payment times so as to maintain cash flow. That may prove extremely difficult for smaller businesses. This bill is not the only solution to this problem, the state can pony up the money and create a new software system or pay for a third-party vendor to do it so we can keep the system as-is

How Should Your Representatives Vote on HB21-1322

HB21-1327 State And Local Tax Parity Act For Businesses (Kolker (D), Woodward (R)) [Ortiz (D), Van Winkle (R)]

PASSED

AMENDED: Technical

Appropriation: $432,578
Fiscal Impact: About $3.6 million a year

Goal:

Allows S corporations and partnerships to elect to pay their state income tax at the business level, which would allow them to take advantage of the unlimited SALT federal tax break. This allows companies to deduct their state income taxes from their federal taxes.

Description:

Allows S corporations and partnerships to elect to pay their state income tax at the business level, which would allow them to take advantage of the unlimited SALT federal tax break. This allows companies to deduct their state income taxes from their federal taxes. All businesses used to have this unlimited deduction, but the big 2017 federal tax cut bill actually capped it at $10,000 for all but C corporations. So in essence, this bill allows S corporations and partnerships to act like C corporations for tax purposes, which brings back the unlimited federal deduction that existed before 2017. Because state law requires all businesses, no matter how they are organized, to add this deduction back into their state taxes (our taxes mimic federal taxes unless otherwise specified), there will be no change to state tax revenue.

A short explanation for those who don’t know, the difference between C corporations and S corporations or partnerships comes in how taxable business income is treated. S corporations and partnerships do what is called “pass through” their earnings to their owners, so the profits or losses actually end up on individual tax returns. C corporations do not, they pay their income taxes as a corporation. A large part of the 2017 tax bill focused on these pass-throughs, as they end up affecting individual tax returns but function at business tax rates.

Additional Information: n/a

Auto-Repeal: n/a

Arguments For:

Bottom Line:

  • This is about fairness. C corporation returns and S corporation or partnership returns are all business tax returns and should be treated the same. This is particularly true because C corporations tend to be the big corporations we think of when we think of corporate America who need this boost much less than S corporations or partnerships which tend to be family businesses
  • Multiple other states have already adopted similar fixes. Michigan’s, adopted last year, is expected to allow its businesses to keep an extra $500 million
  • This will not affect state revenue at all, if anything it might even increase it if the businesses are able to boost their revenues, which are subject to state tax
  • The federal government will be just fine and has multiple ways to address what is a relatively small amount of money for it, including just doing a better job of tax enforcement

In Further Detail: At its core, this is about fundamental fairness. C corporations should not be able to deduct all of their state and local taxes from their federal returns while S corporations and partnerships cannot. They are all business tax returns, regardless of if the corporation itself is paying the tax or it is dispersed to the owners’ individual returns. And to boot, C corporations are generally the mega corporations we think of when we think about corporate America. They need the boost SALT provides the least. S corporations and partnerships are much more likely to be family businesses. Since 2017 multiple states have enacted similar fixes, one in Michigan last year was expected to result in Michigan businesses keeping $500 million a year, which of course can be reinvested in the business. And remember: this bill in essence reverts us back to the status quo before 2017, so it is not a radical concept. The state of course loses no tax revenue in the transaction and the degree to which this helps generate additional economic activity we might actually gain revenue in the long run. The federal government loses revenue, but it has multiple avenues to make that up (and $500 million is actually not a lot for the federal government, our budget each year is in the trillions of dollars), including something as simple as just doing a better job of enforcing the tax laws we have the books right now. And even if you are a proponent of doing away with SALT entirely, or putting a cap on C corporations too, that is federal law and beyond the ability of the state to change. What we can do is ensure all corporations get treated in the same manner.

Arguments Against:

Bottom Line:

  • The SALT deduction is bad and we should be working to help eliminate it, not strengthen it. It is a tax break for corporate America that individual taxpayers do not enjoy and therefore not surprisingly overwhelmingly benefits the wealthy, with about 96% of the benefits going to the top 25% and 25% to the top 0.1%
  • Remember that business taxes work on profit, not revenue, so the extent to which this policy would be pro-growth is not clear. We actually have a long history now with trickle-down economics that clearly demonstrates the opposite: money pools at the top and stays there
  • SALT may be federal policy, but federal tax revenues affect us all and it won’t be so minor if all of the states in the country passed similar work-arounds. Federal money pays for a lot of our human service and health care programs. It pays for Social Security. Threats to federal revenue that could lead to spending cuts will affect us

In Further Detail: SALT is actually bad and the 2017 bill, for whatever else it did, was a step in the right direction toward eliminating it. Remember what this deduction is: it allows businesses to take the money they are paying to the state in income taxes and deduct it from their federal tax returns. People, of course, do not enjoy the same privilege. SALT is one of the biggest tax breaks for corporate America that exists, and before we all start crying about the family businesses that are S corporations and partnerships, remember that these folks are mostly the wealthiest people in America. About 96% of the benefits of SALT before 2017 went to the top 25%, 57% to the top 1%, and 25% to the top 0.1%. It is always critical to remember when discussing income taxes that the key word here is income. There is a tendency by pro-tax cut folks to conflate revenue with income, but businesses get taxed on their profit, not on the money they bring in. That also means we have to think about the alternative of taxing that profit, what happens to that money? Yes, sometimes it gets reinvested in the business but frequently it just ends up in the pockets of the wealthy corporate owners. How do we know this? Because we now have 40 years of experience with the concept of trickle-down economics and have seen in the real world what happens when you dramatically slash taxes on businesses and the wealthy. The benefits do not trickle down to everyone else at all but rather pool at the top. Now it is true that as a state, as Arguments For points out, our options are somewhat limited here. This is federal tax policy. And it is true that this bill doesn’t affect state tax revenue (but it does cost us over $3 million a year to implement). But we should not treat the federal government’s tax collection as someone else’s problem to solve. We rely heavily on spending from the federal government, particularly when it comes to a variety of human services programs and health care programs. All Coloradans rely on Social Security. These programs can all be on the chopping block if the federal government decides it wants to do more about the federal debt. And if all of the states do something like this bill, it won’t be just a small amount of money we can hand waive away. Remember Michigan alone was $500 million dollars.


Bottom Line:

  • The current situation is actually appropriate and should not be changed. Remember that S corporations and partnerships pass on their taxes to individual people. Individual people cannot use SALT deductions on their personal income, so since these are individual returns the same rules should apply

How Should Your Representatives Vote on HB21-1327

SB21-019 Authorize Notices Of Valuation On Postcard (Kolker (D), Simpson (R)) [Tipper (D), Rich (R)]

SIGNED INTO LAW

Appropriation: None
Fiscal Impact: None

Goal:

  • Allow property tax administrators to e-mail postcards with abbreviated notices of valuation to property holders instead of the full valuation each year, with taxpayers still able to access the full valuation if they wish.

Description:

Allows property tax administrators to e-mail postcards with abbreviated notices of valuation to property holders. This must include at minimum: accurate summary of the valuation information, contact information for the assessor, a link to the assessor’s website where the full valuation can be read, and a statement that the taxpayer can get the full valuation instead of the postcard in the future by request. Assessors must mail the full valuation to any taxpayer that requests it.

Additional Information: n/a

Auto-Repeal: n/a

Arguments For:

Bottom Line:

  • Mailing out the full valuation is more costly and frankly more confusing than the postcard
  • Multiple counties are already doing this with success

In Further Detail: The approved full valuation form is two pages, with a bunch of references to different state laws, and quite confusing. What the taxpayer wants to know can easily be fit on a postcard, which is also of course cheaper to mail, saving us money. Anyone who is not satisfied with the postcard can access the full report or request to receive it in the future. A recent survey showed 37% of Colorado counties that responded already using these postcards. This builds upon that success and puts requirements into state law to ensure all counties do it properly. On the privacy concern, the rough amount of someone’s property value can be looked up on Zillow. It is hardly super private information and very few people actually look closely at someone else’s mail in the Post Office—they are just trying to deliver it to the right place.

Arguments Against:

Bottom Line:

  • The request should go in the other direction—postcards are much less private than mail enclosed in an envelope and people may not want their property values printed for anyone who handles the mail to see

How Should Your Representatives Vote on SB21-019

SB21-020 Energy Equipment And Facility Property Tax Valuation (Hansen (D), Hisey (R)) [A. Valdez (D), Soper (R)]

SIGNED INTO LAW

Appropriation: None
Fiscal Impact: None over the 30 year timeframe, but short-term lower revenues, longer-term higher revenues

Goal:

  • Change the method of valuation for property tax purposes of clean energy storage systems and small solar generation facilities from “cost approach” to “income approach” and expand the valuation window from 20 years to 30 years for new facilities

Description:

The income approach is used by most energy generation facilities already. The income approach requires tax assessors to determine how much income the facility is expected to generate over the time frame (in this case 30 years) whereas cost simply takes how much it cost to build and then depreciates the facility over the timespan. In a cost method property taxes start very high and gradually dwindle down to nearly nothing. In the income method they are at the same rate for the entire span of the project. The net effect is expected to be zero over the entire timeframe.

Small solar generation facilities are those that produce under 2 megawatts of power (so-called solar gardens) and are assessed by counties rather than the state.

Additional Information: n/a

Auto-Repeal: n/a

Arguments For:

Bottom Line:

  • This mostly brings these utilities in-line with how we calculate property taxes for a wide range of other public utilities, including other electric utilities and electric generation facilities including clean energy facilities. So it will not be novel to anyone and it provides a steadier approach for both the facility owner and the local jurisdiction

Arguments Against:

Bottom Line:

  • The advantage of the cost model is you get more of the money early, so if the facility no longer exists in 10 years, you aren’t out much of the property tax revenue. Under the income method, there is a danger of losing larger amounts of revenue if the facility doesn’t exist and this is magnified by extending the time frame to 30 years

How Should Your Representatives Vote on SB21-020

SB21-065 Gasoline And Special Fuels Tax Info Disclosure (Liston (R)) [Mullica (D)]

SIGNED INTO LAW

AMENDED: Minor

Appropriation: None
Fiscal Impact: None

Goal:

  • Allow the department of revenue to disclose information from a faulty or false gasoline or special fuels tax form to other taxpayers with common or related issues of fact or law. This is likely to be most salient when parties are under a common audit. Those taxpayers are subject to the same disclosure rules as everyone else. Also require distributors to disclose any books, papers, or records relating to alleged problems with their tax returns to official government investigators upon written request. Those must also be kept confidential

Description: Nothing to add

Additional Information: n/a

Auto-Repeal: n/a

Arguments For:

Bottom Line:

  • When a distributor is under audit by the department it is helpful to understand what other records are being supplied to the audit. Since fuels can go through multiple levels of distribution, if just one level is under audit is useful to have visibility into the other levels of the same fuel
  • We don’t need to run to court every time we have a little dispute over taxation status of fuels, in particular when there is an official investigation, which the bill requires

Arguments Against:

Bottom Line:

  • We have courts to enforce subpoenas in cases where we need records. Just requiring a written request is too wide as is the idea that a government agency can turn those records over to a 3rd party without a court order

How Should Your Representatives Vote on SB21-065

SB21-130 Local Authority for Business Personal Property Tax Exemption (Holbert (R), Pettersen (D)) [Van Winkle (R), Bird (D)]

SIGNED INTO LAW

Appropriation: None
Fiscal Impact: Unknown, state could have to backfill education spending in worst-case scenarios

Goal:

  • Allow local governments, including special districts, to exempt up to 100% of business personal property taxes from collection for the 2021 tax year

Description: Nothing to add

Additional Information: n/a

Auto-Repeal: n/a

Arguments For:

Bottom Line:

  • It’s been a tough year for our businesses and many are still teetering on the edge of collapse
  • Despite the end of the pandemic being in sight it may take several years for the state to fully recover
  • The bill allows for local governments to make a choice: no one will be forced to do it

In Further Detail: Colorado has been hit hard economically by COVID. We have one of the highest unemployment rates in the country (and it actually just rose at the end of 2020, the last month for which we have data right now) and for many businesses that have managed to survive, closure is still a real possibility. Despite the end of the pandemic being in site, our economy won’t simply snap back to where it was a year ago. Full recovery may take a few years. To stimulate that process, we should allow local governments to decide for themselves how much of a hit to business personal property taxes they can afford. No one will be forced to exempt anything and the people making the decisions will be accountable to their voters. This is a good opportunity to help stimulate the state economy and try to recover a little faster.

Arguments Against:

Bottom Line:

  • Property taxes of all types fund local services and as such, they are among the worst levers of stimulus we have—any money that a local government doesn’t collect is money they cannot spend on schools, fire stations, and other basic services
  • This may be a choice but any local government that makes a mistake is going to come running to the state for help—in particular the state is mandated to backfill lost money on K-12 education
  • This would apply to all businesses, struggling or not

In Further Detail: We have a lot of different ways to try to stimulate the economy. Billions more dollars are coming from the federal government, after we’ve already received billions over the last year. That money went all over the place: to businesses, to local governments, and directly to people. All of that money likely saved us from a much worse situation. One thing we haven’t done is tax holidays. That’s because this is one of the worst levers of stimulus we have. In effect you rob Peter to pay Paul. Governments already have lower revenues coming in because of the economy, by depriving them of more money you take away money that is spent on basic services. For local governments, this is things like schools and fire stations. And because the state is mandated to backfill spending on K-12 schools if local governments fall short, if a local government gets out over its skis and deprives itself of too much revenue, the entire state is going to have to pitch in to fix it. In Arapahoe County, just to grab one example, personal property taxes account for 8% of all the taxes the county collects, about $9.5 million dollars per year. That’s a big county of course and every local government will be different, but just shaving off a little bit here can make a big difference. And finally, this program is very much a shotgun approach. All businesses would benefit, whether they need the help or not. We have more federal stimulus money coming to the state. Let’s do a more targeted approach to help businesses without hurting local governments.

How Should Your Representatives Vote on SB21-130

SB21-145 Extending Expiring Tax Check-offs (Simpson (R)) [D. Valdez (D)]

PASSED

Appropriation: None
Fiscal Impact: None

Goal:

  • Authorizes the Colorado healthy rivers fund, the Alzheimer's Association fund, the military family relief fund, the Colorado cancer fund, the Make-A-Wish Foundation of Colorado fund, and the unwanted horse fund to stay on the voluntary income tax form contribution list so long as they meet the legal requirement of receiving at least $50,000 in contributions each year

Description:

This the donation check-box people can use to donate tax refunds to. These funds would join The American Red Cross, state domestic abuse program, Habitat for Humanity, pet overpopulation fund, Special Olympics Colorado, homeless prevention activities fund, the Western Slope Military Veterans’ Cemetery, and the donate to a Colorado non-profit (you pick your own there) as permanent options on the fund.

Additional Information: n/a

Auto-Repeal: n/a

Arguments For:

Bottom Line:

  • This first in the nation but now widely copied program is a great way for deserving Colorado non-profits to raise money. These are all extremely worthy causes and have earned a permanent spot on the form. If they can’t get the annual $50,000 in donations, then they will fall off. All of these non-profits average more than $65,000 a year on average

Arguments Against:

Bottom Line:

  • This entire program is far too unregulated and needs to change. There is no state oversight or reporting required for how the money raised is spent and it has turned into a political popularity contest at the legislature, with the best connected groups able to get on the form since there is no formal application process (it just requires a bill like this one) and then sometimes stay on even when they fail to meet the minimum number of contributions (the legislature just rewrites the rules, like the Western Slope Military Veterans Cemetery which does not need to meet the annual donation requirement). We need a stronger program with better oversight and should not be making anything permanent until we get it

How Should Your Representatives Vote on SB21-145

SB21-257 Special Mobile Machinery Registration Exemption (Zenzinger (D), Scott (R)) [Benavidez (D), Van Winkle (R)]

PASSED

Appropriation: None
Fiscal Impact: About $330,000 this year, then $220,000 each year thereafter lost revenue+added expenses

Goal:

Allow owners of special mobile machinery (see Description for definition, but in essence construction machinery that has to be hauled to the location) who have over 1,000 machines and clearly identify each one as theirs with unique IDs and a phone number to call for verification to be exempt from some license plate and identifying decal fees.

Description:

Allows owners of special mobile machinery (see below for definition, but in essence construction machinery that has to be hauled to the location) to apply for exemption from registration of their machines. The bill still requires payment of ownership taxes (but straight to the state) for these exempt machines but not license plates, annual validating tabs, or identifying decals (and their associated fees).

To qualify, an owner must: own 1,000 or more special mobile machines, each machine must be clearly marked or painted in a manner that identifies the owner, each machine must bear a visible and readily identifiable unique identification number assigned by the owner, and each machine must bear a visible toll-free telephone number for the owner that can be used for verification of ownership.

Special Mobile Machinery is machinery that is pulled, hauled, or driven over a highway and is either a vehicle or equipment that is not designed primarily for the transportation of persons or cargo over the public highways or a motor vehicle that may have been originally designed for the transportation of persons or cargo over the public highways and has been redesigned or modified by the addition of mounted equipment or machinery, and is only incidentally operated or moved over the public highways. Special mobile machinery includes vehicles commonly used in the construction, maintenance, and repair of roadways, the drilling of wells, and the digging of ditches.

Additional Information: n/a

Auto-Repeal: n/a

Arguments For:

Bottom Line:

  • This is about removing inefficiency from our government. To be exempt you essentially have to be a massive operation that already clearly identifies your equipment, so there is no need for the extra layer of government-issued identification for each piece. The county loss in revenue is pretty minimal when you consider it is spread around the state (not entirely, but all of this machinery is not located in just one county) and we don’t need to encourage unnecessary busywork simply because a county may not bring in $100,000 in revenue

Arguments Against:

Bottom Line:

  • The state will likely be just fine without its $200,000 a year (higher expenses and lower revenues) but this bill will also hurt counties by about $250,000 a year too (in total). The convenience for the few companies affected by this bill is not worth the harm to counties. It’s not like the status quo is particularly harmful to these companies. Lost revenue is also one thing, but we don’t need to be actually spending more in state expenditures each year just to track a program like this

How Should Your Representatives Vote on SB21-257

SB21-279 Delinquent Interest Payments Property Tax (Story (D), Simpson (R)) [Roberts (D), D. Valdez (D)]

PASSED

Appropriation: None
Fiscal Impact: None at state level, may have some money shifting impacts at local levels

Goal:

Allows counties to temporarily waive, reduce, or suspend delinquent interest payments on property taxes between June 6, 2021, and September 30, 2021. Require counties to cover local jurisdictions who might miss bond payments due to the decision.

Description:

Allows counties to temporarily waive, reduce, or suspend delinquent interest payments on property taxes between June 6, 2021, and September 30, 2021. Any county that decides to do this must give notice to local taxing jurisdictions in the county. If a local jurisdiction won’t be able to meet bond payment requirements due to this decision, they have three business days to notify the county. If this occurs then the county must make advanced payments to help cover those bond requirements with a maximum of 90% of the payment or the amount of money the decision on interest payments cost the local jurisdiction.

Additional Information: n/a

Auto-Repeal: January 2022

Arguments For:

Bottom Line:

  • We aren’t out of this pandemic yet, certainly not the economic impact of it, and this allows counties some added flexibility to help keep some folks out of debt spirals, where they miss interest payments which adds even further to their debt and they just never get out. It is entirely optional and the bill allows for counties to cover local governments harmed by their decision

Arguments Against: n/a

How Should Your Representatives Vote on SB21-279

SB21-281 State Severance Tax Trust Fund Allocation (Hansen (D), Rankin (R)) [McCluskie (D), Ransom (R)]

From the Joint Budget Committee

PASSED

AMENDED: Minor

Appropriation: $9.4 million
Fiscal Impact: Unknown, depends on the new municipal districts but will be positive

Goal:

Overhaul the so-called “tier 2” severance tax programs, which receive money from the severance tax operation fund only if there is money left over after tier 1 programs are fully funded. Each has a maximum funding amount but if the money is short they split it proportionately. Three of the programs are moved into what amounts to a tier 1b, where they get money appropriated by the legislature as available (the bill appropriates $9.4 million to fully fund them over the next two years). Three get moved to the other half of severance tax funding, the perpetual fund (which is handled by the state water conservation board). One program already had its funding moved to another source by a different bill in this session, and one does not have a new source. The bill also requires all new municipal special districts to pay the severance tax property tax break currently available to operators in their district. And it creates a small group of state agency heads to study severance taxes and recommend changes by next year.

Description:

Removes entirely the so-called “tier 2” severance tax programs. These eight programs are currently funded if there is money left-over in the severance tax operation fund. Each has a maximum funding amount but if the money is short they split it proportionally.

Three of the programs stay in the operation fund at the same maximum level of funding: species conservation trust fund ($5 million), aquatic nuisance species program ($4 million), and soil conservation district grant program ($0.5 million). But instead of the tier 2 formula these programs simply get funded in the annual state budget, so in essence they become part of the old “tier 1” programs, but the bill gives them clear second priority over existing “tier 1” programs (kind of like a new tier 2). The bill also requires a transfer of $9.4 million in each of the next two years into the operational fund and doubles the amount the fund is required to hold in reserve (but at the same time eliminates the reserve for tier 2 programs).

Three of the programs get moved into the other half of severance tax funding, which is called the perpetual base fund: water supply reserve fund, interbasin compact committee, and the water efficiency grant program. The authority over spending in the perpetual fund rests with the Colorado water conservation board.

Two Three programs are not given new funding in the bill. The biggest of these programs is the low-income energy assistance program, a different bill in this session (HB21-1105) already moved this program’s funding to a different source. The other is the forestry grant program, which had a maximum of $2.5 million in funds, and the agriculture value-added cash fund, which was getting tier 2 funding added back by another bill in this session. It would go back to no source of constant funding.

The bill also requires any new metropolitan special districts to pay the state (into the severance fund) and local government the tax breaks oil and gas operators in the districts receive (87.5% of their property taxes, which would have gone into the severance fund). Just like severance property tax, 50% goes to the state and 50% goes to the local government’s severance fund.

Requires the director of the office of state planning and budgeting and the executive directors of the departments of revenue, natural resources, education, and local affairs to review and analyze the state’s severance tax data collection, structure, tax breaks, taxes paid by industry to special districts, tax filing and process efficiencies, and allocation of tax revenues. Must establish a stakeholder group of affected industries and parties, including local government, to assist. The group must prepare written recommendations to be submitted to the legislature by next January December 15.

Additional Information: n/a

Auto-Repeal: n/a

Arguments For:

Bottom Line:

  • The severance tax picture in the state keeps getting bleaker, those old tier 2 programs were probably never going to see money again under the current setup, because oil and gas and coal are being phased out in the state and that is where severance taxes come from
  • For now, the perpetual fund can handle the small programs given to it and the low-income program is already taken care of in a different bill. This bill appropriates money to handle the three new tier 1b programs for the next two years
  • We can take that time to figure out a longer-term solution, which is the point of the report the bill requires
  • We just can’t afford to let these metropolitan districts reduce severance tax anymore, so any new districts will have to pay up. No existing districts are touched

In Further Detail: Something has to be done about severance taxes, as the situation keeps getting worse each year. Those current tier 2 programs were basically set to never see money again (the forecast only goes to 2024-25 and there is no reason to believe the situation will improve at that point) for the simple reason that we are rapidly phasing out oil and gas and coal operations in this state. That is the simple truth and the avowed goal of the Democratic majority that runs the state. So first the bill simply bows to the inevitable and eliminates tier 2. The low-income fund is already taken care of in a different bill. The perpetual fund still has quite a bit of money in it, $422 million, so it can handle these additional small programs. The bill appropriates money to fund the three programs put in that awkward new tier 1B spot for the next two years, which should give us enough time to figure out what to do with severance taxes as a whole. That of course is the point of the report that the bill requires next year and the point of requiring any new metropolitan district to pony up the severance taxes. We literally have nearly 1,800 of these districts in the state right now with more being formed all the time. The bill doesn’t touch any existing districts.

Arguments Against:

Bottom Line:

  • This could have quite the chilling effect on these districts—the bill doesn’t so much repeal the tax break as it requires the district to pay it. Obviously the district will probably need to tax its residents to do so and likely will just slap the tax on the entities that would have been charged severance. That may make it much more difficult to form these districts in the future

Bottom Line:

  • This doesn’t really do much of anything to address the core problem. The fiscal note cannot estimate any new revenue because we have no idea how many new special districts will be created and forced to pay the full amount of severance tax. The clear and obvious answer is replacing the taxes on fossil fuels with taxes on renewable energy. We are past the point of worrying about discouraging adoption of renewables and since the future is clearly 100% renewable, we are going to need replacement for the fossil fuel taxes that fund quite a lot in our state

How Should Your Representatives Vote on SB21-281

SB21-282 Continue Small Business Destination Sourcing Exception (Bridges (D), Woodward (R)) [Snyder (D), Van Winkle (R)]

PASSED

Appropriation: None
Fiscal Impact: None at state level, losses at local level

Goal:

Allow businesses that do less than $100,000 in annual sales in Colorado to continue to use location-sourced sales tax rules (where the business is located) instead of destination-sourced sales tax rules (where the customer is located, for deliveries, not brick and mortar retailers) through February 2022. These businesses were going to have to start using destination-sourced rules in July.

Description:

Extends an exemption for businesses that do less than $100,000 in annual sales inside Colorado from destination-sourcing sales tax rules. That is when a business must pay sales tax in the place it delivers an item, rather than the place it sells it. Exemption was due to expire at the end of June, the bill extends it through February 2022.

Additional Information: n/a

Auto-Repeal: February 2022

Arguments For:

Bottom Line:

  • We have over 100 different jurisdictions in the state including 70 home rule municipalities. That could prove to be an enormous and unjustifiable headache for a small business that doesn’t do much in Colorado, so much so that they skip out on the state entirely, particularly if they have to purchase a sales tax license in the jurisdiction

In Further Detail: This all stems from the Wayfair v. South Dakota Supreme Court case which allowed destination-based sales tax collection. This is of course most relevant to online sales, as physical locations pay sales tax in their physical location. This allows Colorado to collect from out-of-state retailers but it can create an enormous potential headache for a business that doesn’t do much sales in the state. We have over 100 different jurisdictions in this state, including 70 home rule municipalities who have their own rules and frequently do not collect their taxes through the state (in most other cases you pay the state what you owe in local sales tax and the state will pass it along). A business that doesn’t do much activity in Colorado may look at that complex setup and decide to simply skip selling their goods in state, particularly if they have to purchase a sales tax license in all of these jurisdictions. For other businesses, we’ve created an online tool that instantly gives taxing jurisdictions for any address in the state (that tool being ready is what is triggering the end of June deadline).

Arguments Against:

Bottom Line:

  • The online tool provides any business enough information to pay these taxes appropriately (and they only get paid quarterly in most cases). Keeping this exemption can still put some brick and mortar state businesses at a disadvantage, if they are up against multiple companies who are under the $100,000 threshold but still compete with an in-state business. It’s not always Amazon that is the competitive threat

Bottom Line:

  • All of those same arguments for excluding small businesses can just as easily apply to a larger one, even with this tool. Because the tool doesn’t fill out all of those returns for you. No business should have to jump through all of these hoops, calculating all of these different sales tax regimes based on where the customer is located and then having to remit all of these different sales tax payments and forms four times a year, no matter how big it is. This is going to cost these businesses money and they may pass it on to consumers in the form of higher prices. Reverse the decision from 2018 entirely and go back to how the state has operated for years: taxes based on retailer location

Bottom Line:

  • We simply must give our businesses, large or small, more tools to deal with this. A single license that will apply across the state, better guidance on rules in each jurisdiction, more centralized collection. Home rule is obviously a problem but the state has a variety of carrots and sticks at its disposal to try to force home rule jurisdictions to comply and it should use them. Too much is at stake otherwise

How Should Your Representatives Vote on SB21-282

SB21-293 Property Tax Classification And Assessment Rates (Hansen (D), Rankin (R)) [Esgar (D), Gray (D)]

PASSED

AMENDED: Minor

Appropriation: $75,000
Fiscal Impact: Beyond appropriation, about $52 million next year and $56 million the year after, then about $1 million a year

Goal:

Create several new sub-categories for property taxes, including multi-family residential, agriculture, renewable energy, and lodging. Then temporarily reduce non-multi-family residential property from 7.15% to 6.95%, multi-residential property from 7.15% to 6.8%, and non-residential agriculture and renewable energy production from 29% to 26.4%. This is just for 2022 and 2023, then taxes go back to where they were. The way the bill is written, it will have the effect of changing what a petition currently circulating for the 2021 ballot would do. The petition was intended to drop all property taxes from 7.15% to 6.5% for residential and from 29% to 26.4% for non-residential. Instead the petition would only affect lodging (29% to 26.4%) and multi-family residential. It is too late for the petition to be changed. Also expand an existing program that lets seniors and veterans defer property taxes to everyone whose taxes rose 4% or more over a two year period with a cap of $10,000.

Description:

For the next two years, reduces the property tax for non-multi-family residential property from 7.15% to 6.95%, for multi-residential property from 7.15% to 6.8%, and for non-residential agriculture and renewable energy production from 29% to 26.4%. All of these sub-categories of property are new for taxation purposes, created by the bill, although the agricultural designation already exists and does not need to be defined. Multi-family property is defined as a duplex, triplex, or multi-structure of four or more units. Renewable energy is defined in other parts of existing law. The bill also creates a new sub-category of non-residential property for lodging, which is defined as hotels, motels, bed and breakfasts, and personal property located at a hotel, motel or bed and breakfast.

To understand the next part of the bill, you have to understand a ballot petition for the 2021 election. This is currently in the signature gathering stage and cannot be altered. This petition would lower residential rates from 7.15% to 6.5% and non-residential rates from 29% to 26.4%, in both cases permanently. The bill changes the sections of law the petition would affect so that if the petition passes, only the multi-family property rate would be affected, not all residential property, and only the lodging rate would be affected, not all non-residential property. The early estimate on the petition, if it passes and this bill does not, is that it would cost local governments up to $1 billion a year in revenue. We don’t have fiscal analysis for the effect it would have instead if it hits just multi-residential and lodging because the lodging piece is not estimated for this bill (since the bill doesn’t do anything to it). We do know, however, that multi-family residential accounts for $30.7 million lost revenue in 2022 and all other residential is $151.5 million (and that is with a shallower cut, not all the way down to 6.5%), so the impact on the petition would be quite large.

The other important background fact to understand is that all of this dovetails with the repeal of the Gallagher amendment by voters last year. Gallagher would have acted to slash property taxes automatically in order to keep them in line with commercial tax rates, because of the red-hot housing market that is driving up property values (and thus, property taxes).

The bill also makes changes to the existing property tax deferral program, which currently only exists for seniors and active duty military. The program allows people to delay paying their property taxes until the home is sold, at which point the tax is owed (the action puts a lien on the property by the state). The state then loans the local government the missing money. The bill expands this ability to anyone whose property value rose by more than 4% from the average amount over the past two years, but only the portion that exceeds the 4% cut-off. This must be at least $100 with a maximum total deferral of $10,000 (that is not annual, that is lifetime for the property owner on that property). Taxpayers must file a claim for deferral with their county treasurer before April 1st to claim it. Estimate is that this will cost $1 million a year to the state, but it will depend greatly on demand. The bill also requires the governor’s office, in consultation with the state treasurer, to study this proposed deferral program with recommendations for changes by the end of the year. This must explore best practices to structure and administer a low-interest loan program to assist people in paying property taxes on their primary homes. This must include terms of loan, income-based eligibility alternatives, estimate of impact on state budget and cost of implementation.

Additional Information: n/a

Auto-Repeal: Under the bill taxes go back to current values in 2024

Arguments For:

Bottom Line:

  • As we knew might happen, the repeal of Gallagher coinciding with a red-hot real estate market has pushed up property taxes dramatically (through increased values). The bill gives a temporary pause while we sort things out and hopefully slow the acceleration of property values as well as figure out some longer-term structural issues with statewide property tax rates that don’t distinguish between the Front Range and rural Colorado
  • We will still bring in more revenue than we did last year, just not as much as if rates were unchanged
  • The pending ballot measure that the bill to a degree undercuts would be a worse and blunter instrument to deal with this problem: deeper cuts across the board which would tip some areas of the state into severe financial distress
  • The ability to defer payments against the value of the home can help folks whose property values shoot up quickly. Because this can only happen if the property dramatically increases in value, the homeowner should not be in danger of going underwater on the property (owing more than it is worth) even with part of the taxes added on, especially with the $10,000 cap

In Further Detail: We knew this was a possibility when Gallagher was repealed, that property taxes would shoot up faster than we’d like and put a real squeeze on property owners in the state. And that is what has happened, thanks to a red hot real estate market in many parts of the state, home values have skyrocketed so much that even with the temporary tax cut proposed by the bill, we’d still bring in more actual revenue than last year (at its core, this was part of the basic idea of Gallagher, to adjust to changing conditions). That is the first and probably most important thing to understand: this is a cut in the sense that we will bring in less revenue than if the bill did not exist but it is still a likely increase over current revenue because of property value changes. The state also must fill in revenue lost for schools, which is what the vast majority of the state fiscal impact is about. But it is temporary and designed to give us more time to come up with a better solution to statewide property tax than the current system, which is an improvement over the Gallagher system but still has issues, such as statewide tax levels instead of more regionalized rates. Because a core problem remains that many rural areas in fact aren’t surging in value and thus any permanent rate cuts could have devasting affects on those parts of the state when it comes to basic services (not just schools but first responders, roads, etc.) Which brings us to the most controversial part of this bill: it does in fact undercut a pending ballot measure to lower property taxes. In many ways this bill is a substitute for that petition: it is more sensible with a smaller and temporary cut that is more targeted. The voters spoke pretty clearly with the repeal of Gallagher (in a vote that wasn’t particularly close): they do not want slashed property taxes to erode basic local services. This bill provides a balanced answer to our current problem of overheated local property values and yes, in doing so it needs to elbow out the way the potential ballot measure that could dynamite the entire thing. And there’s a new election every year, people are free to run a new petition next year. The final piece of the bill is smaller but could help a lot of Colorado taxpayers if they take the state up on it: delaying part of the tax bill until the home is sold. The basic idea is if someone is struggling to keep up with accelerating tax payments, they can safely delay those payments because the valuation of the home has to be increasing as well. That means that when the home is sold, it will cover the tax owed in addition to anything owed on a mortgage (keeping the homeowner from being underwater, owing more than the home is worth), especially since the cap is $10,000.

Arguments Against:

Bottom Line:

  • This is an underhanded way of derailing a petition measure legislators were afraid would pass. In other words a way of getting around the voters by denying them a chance to have their say. By waiting until it was too late for the ballot measure to be changed, the legislature has pre-nullified the ability of the petitioners to get the change they actually wanted onto the ballot and instead their petition will only change lodging and multi-family residential rates, which is not what the petitioners intended

Bottom Line:

  • This was the entire point behind getting rid of Gallagher—that our property taxes had gotten too low and we needed to get more money into our schools around the state. Yes things are rising faster than anyone could have foreseen, but they are rising above an unacceptably low baseline. So we don’t need a rate cut of any kind, keep the tax levels right where they are
  • We should not be afraid of putting the tax issue in front of the voters—leave the rates alone and let the chips fall where they may. If voters understand that they are pulling $1 billion out of roads, first responders, and schools across the state, they may do the right thing and leave the rates alone

How Should Your Representatives Vote on SB21-293