DENVER – Colorado Democrats are on the verge of approving large new tax credits for the working poor that Republicans say the state can’t afford.
Senate Bill 1 promises a child tax credit and an earned income tax credit once the state budget is in better shape. Both credits are targeted to people with incomes close to the poverty line.
Democratic sponsors said legislators have passed plenty of business tax credits, and now it’s time to do something for the working poor.
“This is an historic opportunity,” said Rep. Daniel Kagan, D-Cherry Hills Village. “We have passed out tax credits before, and they have been for good purposes, but one of the groups that always gets left out is the hardworking, low-income Coloradans.”
But Republicans balked at the cost.
“This is $100 million we’re spending here. This isn’t a couple of bucks,” said Rep. Brian DelGrosso, R-Loveland.
The House advanced the bill Friday and put it in position to pass the Legislature as soon as Monday.
Democrats attempted to lessen the sticker shock by tying the tax credits to two triggers.
The child tax credit would not take effect until Congress grants Colorado the authority to tax online sales. The U.S. Senate is expected to pass that bill soon, although its prospects in the House are dimmer. An online sales tax could bring $65 million to Colorado, Kagan said.
Colorado already offers an earned income tax credit, but it is only in effect in years the state hits its revenue limit under the Taxpayer’s Bill of Rights. That hasn’t happened in a decade, although economists predict the economy is recovering well enough that TABOR refunds will return around 2015.
SB 1 still would not offer the earned income tax credit until the TABOR limit is reached, but once that happens, it makes the EITC permanent.
The federal government offers an earned income tax credit, which low-income workers can get even if their paychecks are low enough that they have no tax bill. The credit is intended to offset the cost of sales, gasoline and property taxes.
SB 1 offers Coloradans 10 percent of their federal earned income credit.
The child tax credit would give taxpayers a $300 benefit for each child if they make $25,000 or less, or $150 per child if they make $50,000 or less.