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HB20-1203 would double tax benefit for working families and fund the state’s Child Tax Credit
Denver, CO– The House Committee on Finance today passed Representatives Emily Sirota and Matt Gray’s bill to double the state’s Earned Income Tax Credit (EITC) and fund the state Child Tax Credit (CTC) while closing a tax loophole that primarily benefits the top earning taxpayers in the state. The bill passed 7-4.
“The Helping Colorado Families Get Ahead Act is an opportunity to right the wrongs of an unfair system that holds too many hardworking Coloradans back from the benefits of the booming economy they’ve helped create,” said Rep. Sirota, D-Denver.
“The Helping Colorado Families Get Ahead Act will help tens of thousands of Colorado families who are struggling to make ends meet,” said. Rep. Gray, D-Broomfield. “By simply closing a loophole that disproportionately benefits upper-income earners and redirecting that money toward helping families put food on the table and afford the rising cost of child care, we can start moving Colorado away from the stunning inequities we all know exist.”
The Earned Tax Credit (EITC) lifts 5.6 million Americans out of poverty each year, including nearly 3 million children, and helps over 22 million working families and individuals each year. It is a refundable tax credit calculated based on a recipient’s earned income, number of qualifying children and other factors. Because the EITC is refundable, recipients do not need to have a tax liability to benefit from the credit. The credit is designed to reward work, growing larger with additional earnings.
Under current law, Colorado’s state Earned Income Tax Credit provides an additional benefit equal to 10 percent of the federal EITC. HB20-1203 would double the state’s existing Earned Income Tax Credit (EITC) to 20 percent of the federal EITC and fund the state’s Child Tax Credit, which exists in statute but has never been funded. To finance the larger ETIC, HB20-1203 would close a loophole in the state tax code that allows businesses to deduct up to 20 percent of their “pass-through” income. Nearly two-thirds of this existing deduction benefits people who make over $200,000 per year whereas the EITC benefits working families with annual incomes below $56,000. This deduction has only been in place for one year and Colorado is one of only five states that still has it.