HB26-1240: Colorado Democrats Expand Tax Giveaways—and Eat Your TABOR Refund

Cory Gaines | Commentary, Colorado Accountability Project

HB26-1240 (linked first below) is a great example of tax policy which mimics a dynamic I have seen with other policy such as gun control.

Rather than taking all in one big shot, something that would get all kinds of undue attention, you take in a piecewise manner. E.g. in year 1 you get red flag laws passed, but they’re limited so as to not cause too much heartburn. When that settles down, you can then spend subsequent years making additions to that first law. In the case of HB26-1240, you start by offering expanded tax credits to people and then you expand the credits further.

In order to fully appreciate what I mean, we have to do some background first.

Colorado’s Earned Income Tax Credit (EITC) is another one of the taxes and/or credits that tags to federal taxes and credits.

In either case, state or federal, the EITC is a credit that directly lowers the amount of taxes you owe; this would be in contrast with a tax deduction which lowers the amount of income that can be taxed.

Let’s say you had a tax bill of $100 and you were eligible to claim an EITC (due to income, age, children––we’ll delve into this shortly) of $20. You would now only owe $80 in taxes.

Let’s say your tax bill was $10 and you were eligible for an EITC or $20. Yes, you would now owe -$10 in taxes. That is, you can, without having paid a dime in taxes, get a $10 “refund” from the government. If you ever see the words “refundable tax credit” somewhere, this is what it means.

EITC’s are tax credits that can actually give money back for a tax bill of nothing.

Colorado’s existing EITC program has some things in common with the federal one, but there are also things that make it different. Quoting from the bill’s fiscal note:

“The Colorado EITC is available to taxpayers who claim the federal EITC, to taxpayers who would otherwise be able to claim the federal EITC but who are ineligible because they do not have a valid social security number [i.e. those here illegally––see the second link below for the bill allowing this among other things], and to taxpayers under age 25 with no qualifying children, but who meet other requirements.”

Further down in the fiscal note you also see that a Federal law during COVID temporarily lowered the minimum age for the EITC and removed the maximum age at both state and federal level. A 2021 Colorado law (among a GREAT many other things, see the bill linked third below) made that lower minimum permanent for Colorado’s EITC.

Let’s summarize to here.

Colorado’s EITC is a refundable tax credit that can be claimed on your Colorado state taxes. It is calculated as a percentage of the federal EITC you can claim, but Colorado has made more people eligible for our tax credit than the federal government: we allow illegal aliens to claim it and we permanently lowered the minimum age at which you can claim it.

So far so good. The progressives sponsoring HB26-1240 are wanting to move in the opposite direction. That is, they want to remove the upper age restriction to claim a Colorado EITC. They want to allow childless people above the age of 64 to claim it (under current state and federal law, anyone with qualifying children can claim an EITC).

In other words, what we’re about here is expanding the folks that get tax breaks one nibble at a time.

I mentioned at the top that this is a dynamic you see often in legislation. It’s right there with the old “study in year 1 becomes bill in year 2” I’ve often mentioned. It’s pass a law in year 1 and expand who it applies to in year 2.

I don’t even allege that this requires foresight either (in both the case of taxes and gun control). I could easily see this sort of thing happening by plain old opportunism.

The problem with expanding tax breaks becomes quite readily apparent when you look at the bill’s fiscal note. Screenshot 1 attached is table 1a from the note.

Offering these expanded tax breaks means more government employees for us to support and it means less revenue (which we get to make up).

How do we make it up? By getting less of our money back. That is, this bill is yet another one designed to gobble up any TABOR surplus. It’s taking money from you and giving to another, but without the money ever getting into your hands in the first place. Quoting from the fiscal note:

“The bill is expected to decrease the amount of state revenue required to be refunded to taxpayers by $4.0 million in FY 2027-28. This estimate assumes the December 2025 LCS revenue forecast. A forecast of state revenue subject to TABOR is not available beyond FY 2027-28. Because TABOR refunds are paid from the General Fund, decreased General Fund revenue will lower the TABOR refund obligation, but result in no net change to the amount of General Fund otherwise available to spend or save in FY 2027-28, and any future years when the state is over its revenue limit.”

As you can see in screenshot 2 attached, this vote already got past its first House committee hearing and now (as of this writing) awaits its hearing at the House Appropriations Committee.

I have no doubt that, when there, the idea that this costs us nothing will be repeated often. It’s right above this in the quote.

It should be remembered, however, that this costs the state nothing. They don’t have to pay out more for this.

It still costs you money that would have otherwise been returned.

https://leg.colorado.gov/bills/HB26-1240
https://leg.colorado.gov/bills/hb20-1420
https://leg.colorado.gov/bills/HB21-1311

“Freedom only for the supporters of the government, only for the members of one party … is no freedom at all”

The quote heading this post is from the radical and ardent communist Rosa Luxemborg. The quote in full comes from her work titled “The Russian Revolution” reads (taken from the first link below):

“Freedom only for the supporters of the government, only for the members of one party – however numerous they may be – is no freedom at all. Freedom is always and exclusively freedom for the one who thinks differently.”

Ms. Luxemborg and I would likely disagree on a great many things in economics. When it comes to her thoughts on authoritarianism/strong central authority, she and I are in agreement.**

Ignore the communism, and reflect on how Ms. Luxemborg’s concerns manifest in Colorado. How well do your concerns get addressed by Colorado’s Democrat political machine? How well do they understand and allow for all the diverse needs and viewpoints of the state? How protected do you think your rights are and have been?

I’m betting, that if you fall in line with their wishes, your answers to the above questions would be quite different than if you live in a rural area, believe in the Second Amendment, or in some other way believe differently than those in the liberal Denver/Boulder axis do.

There is a line in the Constitution: “to secure The Blessings of Liberty to ourselves and our Posterity…”

What more do any of the officials running this state have to do than that? And yet, the way they run this state demonstrates their continued (and continuing failure) at it.

I can’t help but think this is because “Liberty” to them means not freedom, not lack of interference, but rather centralized control if you don’t think like they do. Authoritarianism in some aspects of life, hands off in others.

No restrictions whatsoever on abortion put next to telling you what kind of appliance you should heat your house with.

It’s pot shops open while churches have to be shuttered.

What happened to liberals like Ms. Luxemborg? The ones who we might disagree with about economics or other things, but who fundamentally respect your right to be you, who believed that it wasn’t a centralized, authoritarian government’s job to tell you how to live?

“Freedom is always and exclusively freedom for the one who thinks differently.”

**Luxemborg, not one to back down from a fight, was highly and publicly critical of Lenin in this regard. Lenin believed (as many Bolsheviks did/do) that a strong group of central planners would be best for a communist state. She didn’t. See her essay in full for more.

https://www.goodreads.com/quotes/11687231-freedom-only-for-the-supporters-of-the-government-only-for
https://en.wikipedia.org/wiki/Rosa_Luxemburg

READ THE FULL COMMENTARY AT COLORADO ACCOUNTABILITY PROJECT

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