TUESDAY UPDATE: Apropos from the Colorado Sun’s Brian Eason:
President Donald Trump’s $400 billion federal tax cut for pass-through businesses has emerged as a top target of Colorado Gov. Jared Polis as he looks to eliminate corporate tax breaks to pay for a statewide income tax cut.
The Democratic governor’s goal: A permanent cut to the state income tax rate that would lower the tax bills of most Colorado households and many businesses. But to pay for it, some wealthy households and businesses — namely large retailers and a wide category of companies that includes law firms and much of the financial industry — would see their taxes go up…
Polis wants to eliminate an unspecified amount of corporate income tax breaks to pay for a cut to the state’s income tax rate. In the campaign Polis said he hoped to reduce income taxes by 3 to 5 percent — or up to $450 million. But administration officials now are cautioning that the number will depend on the value of the tax breaks they’re able to eliminate. [Pols emphasis]
Just over a week ago, the Colorado Fiscal Institute put out their detailed analysis of a Republican tax cut bill introduced this session–Senate Bill 19-055, which would cut the state’s income tax rate from 4.63% to 4.49%, would cost the state an estimated $280 million while reducing taxes by a whopping $59 on a resident earning $60,000 per year.
The net effect (or lack thereof) was best illustrated by this table from the CFI:
The politics of this bill, which is likely to die in the Democratic-controlled Senate Finance Committee tomorrow afternoon, were briefly scrambled after Gov. Jared Polis Tweeted in apparent support shortly after it was announced by the Senate GOP minority. One of Gov. Polis’ platform planks as he took office, after all, was a shake-up of the tax system, with the goal of relief for individuals and more skin in the game for wealthy corporate interests.
Under the hood, as CFI explained well in their analysis, this legislation doesn’t do anything to accomplish Polis’ goal of changing the tax system in a “revenue neutral” manner. It simply cuts taxes, and regressively at that–providing almost no relief to the residents who everyone likes to say need tax relief the most. If we really want to give meaningful tax relief to working families, programs like the Earned Income Tax Credit are a far better way to direct it.
Because this particular bill never really had a chance in the Democratic-controlled General Assembly, most observers we’ve talked to think that Gov. Polis was more interested in showing good faith on one component of his agenda, with the party who wants to hear about that part the most. In reality, a reduction in any particular tax rate will have to be part of a larger conversation–one that takes into account the state’s long-term fiscal shortfall, and a realistic appraisal of the backlog in funding priorities of every kind.
Suffice to say that we’re in the very earliest stages of that discussion.