DENVER, CO — The House Committee on Finance today passed HB20-1420, sponsored by Representatives Emily Sirota and Matt Gray, which would end state tax handouts for corporations and the very wealthy in order to protect funding for K-12 education. The bill preserves economic relief for hardworking Coloradans and small businesses.
“Our schools are facing devastating cuts while Washington is forcing Colorado to give away millions in state tax handouts to wealthy corporations and millionaires,” said Rep. Sirota, D-Denver. “It’s time to pick a side. In Colorado, we don’t need tax policy for the wealthy. Let’s make sure our state supports teachers and students, not special interests.”
“The pandemic has left our state with a $3.3 billion shortfall as schools struggle to retain teachers and meet the needs of our students,” said Rep. Gray, D-Bloomfield. “This bill will provide a significant boost to hardworking families. It preserves economic relief for those who need it while closing tax loopholes in order to protect funding for K-12 education.”
Several provisions in Colorado’s tax code follow federal law and cost the state hundreds of millions a year, but primarily benefit the wealthy. This legislation makes means-tested changes to eliminate state handouts for special interests and the wealthiest individuals while protecting them for hardworking families to avoid devastating cuts to education.
- CARES Act Loopholes: Eighty-two percent of the benefits from a provision of the CARES Act that allows for the deduction of excess business losses (CARES Act Section 2304) goes to filers with incomes above $1 million. Only three percent of the benefits go to filers with incomes under $100,000. The bill preserves the relief for hardworking Coloradans under that threshold while eliminating it for millionaires. The bill also limits the amount of net operating loss deductions a company can claim in one year to $400,000, preserving the deduction for 98 percent of filers while capping them for the wealthiest businesses. Finally, it rejects a CARES Act hand out of interest expense deductions (CARES Act Section 2306) for corporations larger than $25 million, saving the state $2 million a year.
- Trump Tax Scam “Pass Through” Loophole: The 2017 federal tax bill, pass-through businesses can take a 20 percent deduction off their qualified business income (QBI), essentially reducing the amount of taxable income. In Colorado, a quarter of the benefit of this tax break goes to households with incomes above $1 million, while households with incomes below $75,000 receive only 11 percent of the benefit. The average millionaire gets nearly a $9,000 break from the state while someone making $30,000 to $40,000 may get $70 or $90. The bill preserves the relief for hardworking Coloradans making under $75,000 while eliminating it for those who don’t need it.
- Insurance Company Handouts: The bill removes a tax break for insurance companies who maintain an in-state office. Just 85 insurance companies in Colorado get a 50 percent tax break averaging $1 million because of an outdated provision that the State Auditor has found is ineffective at its intended purpose.
Capital Gains: Colorado allows a tax break for income on investments in personal property and other capital gains, even if that property isn’t in Colorado. It costs the state $8-$20 million a year, and only 0.2% of all Colorado tax filers get this benefit. The very wealthiest 0.1 percent of Americans—taxpayers with AGI over $2 million—received almost half, or 49 percent, of all capital gains income.