January 8th marks the beginning of the 72nd Colorado General Assembly's second session and many taxpayers are wondering what they can expect when it comes to legislation that can most impact their wallets and their livelihoods. Here's a brief recap of what to keep your eye on starting on Wednesday:
The Public Option
Healthcare remains a priority for most legislators this session, and that seems to be culminating in a "public option" proposal by Senator Kerry Donovan (D-Vail) and Representative Dylan Roberts (D-Eagle). The title is somewhat misleading, as the "option" would actually be provided by insurance companies via force by the state government. The plan's most controversial aspect is state-mandated price caps that would limit how much a hospital can charge for certain operations, procedures, and services.
Unsurprisingly, it seems that opposition from the healthcare industry has already mounted, and signals of unintended consequences seem to be laser-focused on legislators who will listen. The program would be a first for the nation, so just how much this could affect taxpayers is yet to be seen. One consideration is that if hospitals are forced to only charge certain patients a set amount, they may offset costs by raising prices on those patients that are not under the new "public option."
You can read more about the proposal in a recent Colorado Independent article.
Paid Family Leave
As we discussed before, the FAMLI Act may already be dead on arrival, but that won't stop Senator Faith Winter (D-Westminster) from giving it the ole college try in 2020. Without a doubt, this legislation has the greatest chance to make an impact on your life.
A recent report published by AMI Risk Consultants of Miami stated that Colorado's program may need to tax up to 1.18% of your income to generate the revenue necessary to sustain the paid family leave program. This is an even greater percentage than was originally proposed in 2019. You can read more about the risk audit and the numbers in the Denver Business Journal.
We'll have to see if legislators finally throw in the towel on this proposal or charge full-steam ahead despite even Governor Polis issuing warnings that he won't sign anything that isn't fiscally sound. Regardless, keep your eyes on this proposal as it has the ability to take up to 1.18% out of every paycheck you earn.
Income Tax Reform
It's unlikely to pass - but almost certain to come back - but Republicans get excited everytime Governor Polis mentions his wish to permanently bring down Colorado's income tax rate. The issue is the fine print. While Republicans want to simply slash the rate and subsequently slash the budget (or at least decrease excess revenues), Governor Polis wants a "revenue neutral" option that eliminates loopholes and subsidies to reduce the rate. In 2019, legislative Democrats didn't entertain any ideas about cutting the income tax rate, killing the Republican proposal in committee. We'll have to see if that changes at all in 2020.
Ending Private Prisons
Setting aside any ethical arguments, the fight over private prisons is certain to reach its climax in 2020. As reported in the Denver Post, some lawmakers want to get Colorado off the private prison wagon sooner rather than later. While the ethical discussion will suck the air out of the room, it's worth considering that many Colorado communities are based almost-solely on the prisons that are part of them. Counties such as Bent and Crowley derive significant percentages of their property taxes from the prisons within them as well. This is worth keeping your eye on, especially if you live in or near a private prison in Colorado.
Won't Be Coming: Public School Finance Reform
It doesn't look like any significant reform of the public school finance formula will be happening in 2020.
Last year’s Paid Family Leave proposal, Senate Bill 19-188, was eventually reduced to a study committee that created a task force that has been meeting to craft a new proposal to be introduced in 2020. Unfortunately, it seems that taxpayers may be getting more of the same when it’s brought back.
A newly-released study is showing that the proposal could cost upwards of $2.1 billion, and could take 1% out of every Colorado workers’ paychecks.
The good news is that the proposal seems to be losing support before anybody has seen it, simply based upon the direction of the task force. The task force also rejected Governor Polis’ proposals for the legislation, not shedding much hope on the proposal as a whole.
Sources from within the Capitol have informed us that the coalition of organizations that originally brought the Paid Family Leave proposal before the legislature seems to be splitting at the seams. Supposed disagreements surround what compromises should be made with Colorado’s business community, with 9to5 Colorado firmly planting its feet while others want to work with the business community to ensure a bill can get across the finish line.
What may be the most interesting to pay attention to is not necessarily what happens with this family leave proposal, but instead what other legislators bring forward as alternatives. Especially in an election year, many are wary of angering their local chambers of commerce, and we may see willingness from legislators in swing districts to want a “win” on the issue without jeopardizing their electoral chances.
A great deal of legislation during the First Regular Session of the 72nd General Assembly will impact Colorado taxpayers and businesses, and we've prepared a brief rundown of the legislation that you should pay the closest amount of attention to as it goes into effect (or returns for an encore).
Paid Family Leave
Markedly a failure for its advocates under the Golden Dome, Senate Bill 19-188, a proposal for Paid Family Leave in the State of Colorado, was watered down to a study last session, which means appointed individuals have been hammering out a proposal to bring to legislators. Unfortunately for taxpayers, this means we’ll have to deal with this legislation in 2020.
The original legislation was fraught with abuses of the Taxpayer Bill of Rights (TABOR), including a tax (labeled a fee) that would’ve applied to every single employee currently working in the State of Colorado – without any opt-out mechanism. It also allowed a single, unelected administrator to increase the fee if necessary, didn’t consider companies that already provide family leave, and had no carve-outs for small businesses that aren’t able to lose employees for longer periods of time.
As we previously highlighted, the 2020 proposal is already on life support.
Retirement Savings Accounts
Senate Bill 19-173 crafted the "Secure Savings Board" to investigate the possibilities of the Colorado State Government providing retirement investment plans to Coloradans. While we haven't seen the exact implementation mechanisms for this idea yet, it's still a piece of legislation that Coloradans should be aware of.
While legislators strayed from another statewide increase of the minimum wage, they did pass House Bill 19-1210, which now allows municipalities to increase the minimum wage on their own, as long as it is above the state-mandated minimum. Denver has already taken action on this, increasing the minimum wage to $16/hour by 2022. Undoubtedly, this will result in less take-home pay for lower-income Coloradans and more difficulty for small businesses in hiring new labor.
Reduction of the State Income Tax
Don't get too excited - despite Governor Jared Polis' previous interest in reducing the income tax rate for Coloradans, Senate Bill 19-055 didn't get across the finish line, never making it out of committee. The bill would have reduced the rate by approximately 3%. It is unclear whether this proposal could come back in 2020, and unclear if Governor Polis will flex any more muscle with his own party to ensure its passage.
HB 1209 - No 529 Account Income Tax Deduction for K-12 Expenses
(Pettersen & Garnett/Donovan)
Under the Federal Tax Cuts & Jobs Act which was signed into law in December of 2017, families with children in kindergarten through high school will likely be allowed to benefit from a 529 account, a tax-advantaged savings plan that was previously used only for qualified higher education expenses. The federal tax bill expanded the use of these savings plans to allow contributions for qualified elementary or high school expenses to qualify for the federal tax deduction.
The legal implications of this expansion are still being determined, but the Colorado Legislative Office of Legal Services has expressed that it believes these K-12 contributions will be eligible for state income tax deductions. If this becomes current law, families could benefit from making financially responsible savings choices regardless of how old their children are.
Unfortunately, Representatives Brittany Pettersen & Alec Garnett, along with state Senator Kerry Donovan brought legislation that would not allow K-12 savings plan contributions to be eligible for the state deduction, even though nonpartisan fiscal experts at the state Capitol have interpreted current law as allowing the deduction. Thankfully, Senators Jack Tate, Jim Smallwood, and Tim Neville all voted to kill House Bill 1209 and to give Colorado families a chance at saving for their kids’ futures.
In honor of Tax Day, CTAF wants to remind you how the Colorado Taxpayer Bill of Rights (TABOR) is helping keep politicians accountable to the people.
Back in 1992 Colorado voters were wary of big government, and enacted TABOR to limit state spending and to require refunds to the taxpayers if the state encounters too great of a revenue surplus. This amendment to the Colorado constitution allowed for reasonable growth due to inflation and population growth, but otherwise has kept state legislators from growing government more than they already do. Referendum C was passed by the voters in 2005, and gives the state a little more flexibility in how much it can spend and retain.
Without TABOR, it’s scary to think of the budget that would emerge from the Capitol. Nonpartisan Legislative Council Staff at the Colorado General Assembly forecasts that the state will have $8.4 million above what it is allowed to spend in the upcoming fiscal year; that’s $8.4 million that would be spent on growing government programs instead of being returned to its rightful owners.
Just this month, there was a proposal to give $529.0 million to the Colorado Department of Education—that’s in addition to the $150.0 million already allocated to the Department for the upcoming year. Even worse, the Public Employees Retirement Association (PERA) faces an unfunded liability of $33.0 to $50.0 billion, but certain legislators would rather squander the cash than to chip away at this problem or at least return the money to taxpayers.
When legislators propose these lofty funding ideas, they seem to forget that Coloradans are the ones to foot the bills. Fortunately, TABOR is a small daily reminder that the people of the state should be the sole decision makers for these spending questions. As you wait on your tax refund to hit your bank account, or rush to file your tax return before the end of the day, be thankful that TABOR is around to keep more of your money in your own hands.
2nd reading in the House on Wednesday, March 28th
Unlike the politicians in D.C., state legislators in Colorado must pass a balanced budget every year, within the 120 day legislative session. In fact, this is the only true requirement of the General Assembly; no other bill carries the weight of the Long Appropriations Bill, aptly called the “Long Bill”, and few bills can attract 100 amendment as the Long Bill does.
Because of new revenue that the state is expecting to collect in the upcoming year due to changes in tax law at the federal level, the Colorado Taxpayers Advocate Fund scrutinized this year’s budgeting process. Not surprisingly, this year’s Long Bill rounds out at nearly $30.0 billion, with almost $11.0 billion of that funding being directly attributable to taxpayers’ mandatory contributions to the state. With so much new revenue likely to be available, it would be responsible for the state to return to voters what truly belongs to voters.
While this isn’t likely to happen, Taxpayers can be hopeful that some of their concerns are being heard. Senator Kent Lambert, a Republican from El Paso County, was able to set $500.0 million aside to address the state’s struggling roads and bridges. The Republican caucus made transportation funding a priority all year, so it was no surprise that this request was one of the first made. The Democrat caucus has historically prided itself in funding education generously, and set $150.0 million aside. Both parties seemed to agree that the Public Employees Retirement Association (PERA) needs serious reforms, but it’s yet to be seen if they can compromises on that front.
What priorities would you like your state to fund in the upcoming year? Join the conversation here or on our Facebook page.
You can learn more about the Long Bill on the General Assembly’s website. The Colorado House of Representatives are set to begin debate on the Long Bill on Wednesday, March 28th.
Amendment 64, passed by voters in 2012, was touted as both a personal freedom milestone and a surefire way to bring an abundance of tax revenue to the state. Confused about why Colorado hasn’t yet evolved into Dubai 2.0 or why schools keep asking for money? So is just about everyone in the state.
To the state government’s credit, it has followed through in appropriating the correct amount of marijuana-related revenue to public schools: Amendment 64% required the first $40.0 million in excise taxes to be placed in a fund dedicated to school construction. There is also a small portion of the state sales tax revenue that is distributed to the State Public School Fund, but the majority of marijuana sales tax revenue is deposited into the Marijuana Tax Cash Fund.
To learn more, the Colorado Taxpayers Advocate Fund put together a graph to show you just where this money is going. You can also learn more here.
SB 196 - Repeal Late Vehicle Registration Fee
Sponsored by Senators Neville & Lundberg and Representative Ransom
On Saturday, March 10th, the Colorado General Assembly officially reached the halfway mark of its 120 day legislative session. As legislators celebrate the halfway mark, the CTAF blog will continue to commend the legislators who are proposing to reduce taxes or fees for the state.
Senators Tim Neville and Kevin Lundberg recently introduced Senate Bill 196, a common sense piece of legislation that would repeal the late fee that’s assessed for failing to register a motor vehicle within the time-frame set forth by the Department of Revenue. Set in place by Senate Bill 09-108, vehicle owners can be slapped with a $25 fee for each month that the owner is “late” for registering the vehicle. Going back to 2010, various legislators have attempted to either soften the penalty or do away with it altogether, but every year the effort is killed.
The late fee fails to recognize that most Coloradans spend their day earning a living, and have little extra free time to spend at the DMV. Although the state has attempted to make the registration process more streamlined, some people can’t afford to take off work or to hire a babysitter for the hour or two it might take to complete the registration process. Colorado Taxpayers Advocate Fund doesn’t think that residents should be penalized for being hard working, and applauds Senators Neville and Lundberg for taking the lead on this bill.
SB 18-196 will be heard in the Senate Finance Committee on Tuesday, March 13th.
SB 128 - Legislative Approval for State Agency Fee Increase
Sponsored by Senator Bob Gardner & Representative Larry Liston
From hunters and fishers to business owners, all Coloradans understand the “necessary” evil of paying a fee for various services. Sometimes it’s a fee that you might expect, like the $26 fee paid to purchase or renew your driver’s license. Other times, the fee is more discreet, such as the Healthcare Affordability and Sustainability Fee (formerly known as the Hospital Provider Fee) which is assessed by most hospitals—to the surprise of most patients. Unlike taxes, which can only be increased if approved by the voters, most fees assessed by the state can be increased by a state agency, without approval of the voters or even the General Assembly.
Thanks to state Senator Bob Gardner, state agencies might be required to ask permission from the Colorado Legislature before it can increase fees. Senate Bill 128 would require the agency to justify the need for a fee increase by outlining the exact uses of fee revenue as well as the potential impacts on taxpayers if the request is denied. The bill gives Coloradans a greater ability to follow their money through state government, and allows them to tell their elected officials when enough is enough.
SB-128 passed the Senate on Wednesday, February 21st.
SB 061 — Reduce the State Income Tax Rate
Sponsored by Senators Grantham & Sonnenberg
With monumental growth of Colorado’s economy comes continued efforts to expand state government. The proposed state budget for the upcoming fiscal year breaks $32.0 billion, about double the size of the total budget from ten years ago. The fact that the state has benefited from unrestrained revenue collection is a slap in the face to the people who contribute so much to making the state one of the most attractive in the nation.
Taxpayers might see some relief, though, if Senate Bill 061 becomes law. The bill, carried by Senate President Kevin Grantham and Senator Jerry Sonnenberg, would lower the state income tax rate from 4.63% to 4.43%.
The small percentage point reduction might seem trivial at first thought. But when the opportunity arises to save a few bucks, do any of us really shy away from it? $20 from the electric bill each year, a grocery bill that comes in $12 lower than normal, paying $10 a month for Netflix instead of $90 for cable—these are all savings that most Coloradans rejoice in.
An average household in Colorado making the median annual income of $62,520 paid roughly $2,894.68 in state income taxes in 2016. Under SB-061 that same household would have saved $125 in 2016—read, enough to put toward monthly car insurance, a lift ticket, or any of the various expenses that we face.
Colorado Taxpayers Advocate Fund, Inc. exists to educate citizens and Colorado public officials on issues of public policy so they can, if they choose, make a difference in their community on issues affecting their city, state, and even their country at large.