DENVER, CO — The House today passed HB20-1420, sponsored by Representatives Emily Sirota and Matt Gray, by a vote of 39-26, with House Republicans standing with special interests at the expense of Colorado’s teachers and students.
HB20-1420 ends 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 and invests $1 billion to K-12.
“We need to make a choice; we can either give taxpayer funded handouts to corporations and wealthy individuals who don’t need them, or we can protect our students and underpaid teachers,” said Rep. Sirota, D-Denver. “Colorado can’t afford to follow politicians in Washington who want companies making $25 million or more to get economic relief while our schools struggle to retain teachers.”
“We had to close a $3.3 billion hole in our $12.5 billion budget, and that has meant painful cuts to education that no one wants to see,” said Rep. Gray, D-Bloomfield. “The Fair Tax Act gives hardworking families a boost and invests $1 billion in our schools to protect our students and teachers from these severe cuts while preserving economic relief for those who need it most.”
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 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.