Gov. Jared Polis on Wednesday signed into law four bills aimed at fundamentally restructuring Colorado’s tax code.
"Today is certainly one of my most exciting days as governor because we're delivering on tax relief for the people of Colorado," Polis said, touting the package during a signing ceremony at Boettcher Mansion. "Together, we're providing meaningful tax relief so families can afford to live in our great state a little bit better and keep more money in their pockets."
According to sponsor Rep. Emily Sirota, D-Denver, HB 1311 modernizes the state’s tax code, closes special interest tax loopholes for large corporations and wealthy individuals and benefits small businesses.
The bill Sirota carried along with Rep. Mike Weissman, D-Aurora, and Sens. Chris Hansen, D-Denver, and Dominick Moreno, D-Commerce City, increases the state Earned Income Tax Credit, which is for low-wage earners. Under current law, Colorado’s Earned Income Tax Credit is available for those who claim the federal EITC. The bill raises the Colorado credit from 15% to 20% of the federal credit.
It also funds the Child Tax Credit, which would provide up to $600 in tax credits per child for up to 200,000 families. That credit is intended to help pay for child care and other pre-elementary school expenses.
The changes are paid for by capping certain itemized deductions for taxpayers with adjusted gross incomes at $400,000 or more, eliminating the capital gains deduction, and eliminating what’s known as a “pass through” deduction of 20% of business income created under the federal Tax Cuts and Jobs Act in 2017.
Meanwhile, the major provision in HB 1312, from the same set of sponsors, is to increase to $50,000 the business personal property tax exemption for small businesses. That's property taxes businesses pay on items such as desks, computers, phones and other movable equipment that they use to run their operations.
Under the bill, the first $50,000 in property would be exempted from those taxes, up from $7,900. And while those taxes are paid to counties, the state would backfill the costs under the bill. The measure also provides incentives for employee-owned businesses.
The bill's cost, about $19 million, according to the fiscal analysis, is paid for by changes in tax policy for insurance, oil, gas and coal companies, which could not only eventually generate about $150 million per year but would also result in a TABOR refund in 2022-23 that would be paid the following year.
Ahead of Polis putting pen to paper on the measure, Weissman praised the work that went into enshrining the policies in state law, noting the bills were the culmination of a year's worth of work.
"We learned from our state auditor, we learned from the experience of other states and we made some changes that are going to help hundreds of thousands of lower and middle income families who we know have been struggling and tens of thousands of Colorado small businesses," he said.
Polis also signed House Bill 1327, a measure from Reps. David Ortiz, D-Littleton, and Kevin Van Winkle, R-Highlands Ranch, and Sens. Chris Kolker, D-Centennial, and Rob Woodward, R-Loveland, aimed at granting a tax break for small businesses.
The bill allows pass-through businesses such as sole proprietorships, partnerships, and S-corporations to pay their state income tax at the entity level, rather than the individual level, beginning in tax year 2022. These businesses could pay taxes like a C-corporation, which would allow them to claim an unlimited deduction at the federal level for state and local taxes paid.
The governor rounded out the ceremony by putting his signature on Senate Bill 293, which is designed to reduce property tax assessment rates.
The measure from Hansen, Sen. Bob Rankin, R-Carbondale, Rep. Matt Gray, D-Broomfield, and House Majority Leader Daneya Esgar, D-Pueblo, rewrites property tax classifications, dividing the current two classifications into six subsections and reducing assessment rates for four of those new classifications.
Lawmakers on Tuesday certainly had their running shoes laced up, but the last day of the session transformed into a sprint, and then a slog. But at 7:41 p.m., the House crossed the finish line and adjourned sine die.
Senate Bill 293 was introduced late Wednesday and as of Thursday night is the 623rd and likely last bill introduced in the 2021 session. Its first hearing with the Senate Finance Committee drew a small contingent of those normally viewed as Democratic allies in opposition to the bill.
According the Gray, the bill is designed to address "one of the paradoxes of this pandemic."
"Even though a lot of folks have suffered in losing their jobs or have their jobs to put off we have not seen the cost of housing go down at all — if anything, it's gone up," he said. "We're trying to address that head on."