Members of the Colorado House of Representatives on May 9, 2022. (Pema Baldwin for Colorado Newsline)
Rising inflation and the strain it’s causing for consumers motivated Colorado state lawmakers to pass 13 measures in the 2022 legislative session that will result in nearly $662.7 million in savings for Coloradans, according to a Bell Policy Center analysis.
Buoyed by federal funds and one-time dollars, lawmakers crafted policies that acknowledged the economic pain all Coloradans — but particularly lower- and middle-income families — are feeling at the grocery store and the gas pump.
And that doesn’t include the more than $2.74 billion the state will distribute in the form of $750 TABOR rebate checks to every Colorado single-filer taxpayer.
“Savings” is a catch-all for the fee reductions and delays, tax credits, deductions, exemptions, rate cuts, and other steps lawmakers took to help Coloradans weather financial upheaval. It was an exercise in using manicure scissors — as opposed to a machete — to make the right cuts in the right places for the people who need it most.
There are a lot of ways to write legislation to save people money. Regulatory changes can reduce prices for things like prescription drugs. New public programs that use tax revenue to subsidize specific costs, such as universal preschool for 3- and 4-year olds, help as well. And, the tax code can be rewritten to deliver relief.
While these are valid ways of “saving people money,” it’s a double-edged sword, since they also cut the revenue available for vital services.
In just a few years, Colorado likely will have to cut funding for education, health care, and other priorities, or find more revenue.
More than 60% of the nearly $662.7 million in savings will come in the form of property tax relief, through tax exemptions and assessment rate cuts. Commercial property owners saw the biggest gains as the first $30,000 in value will be tax exempted and the assessment rate will go from 29% to 27.9%. Residential homeowners will receive a $15,000 exemption and an assessment rate reduction from 7.15% to 6.765%. These temporary reductions will result in revenue losses at the local government level and those losses will be backfilled by a mix of one-time general fund dollars and future TABOR surpluses. And this highlights something our state will have to grapple with in the near future: Saving people money comes at a cost.
Similarly, nearly $87.8 million will stay in people’s pockets as the state reduces or postpones fees people pay for things like filing fees to start a business, or a future gasoline fee intended to pay for needed infrastructure across the state. These fees will be backfilled by the state general fund to save people money, while ensuring that government operations that depend on fees — like enforcement for business fraud or funding for infrastructure projects — will continue.
Finally, more than $2.74 billion will be distributed via $750 checks to every Colorado single-filer taxpayer as a rebate mandated by TABOR. Previous law would have distributed these funds in a regressive way — giving a disproportionate amount to the top 1% of taxpayers — but the Legislature changed the law so that every Coloradan will get the same amount this year. It’s an acknowledgement of the difficulties that working class Coloradans are encountering because of spiking inflation and soaring costs. It also shows how a fairer tax code can help Coloradans who need it most.
This state budget year was an anomaly, as inflation has warped the economic outlook for many, and historic federal funds and one-time revenues have given lawmakers the ability to respond in ways that are not usually possible.
In fact, according to the governor’s Office of State Planning and Budget, we are nearing a structural deficit — meaning that the revenue Colorado brings in will be insufficient to meet the needs of communities across the state. In just a few years, Colorado likely will have to cut funding for education, health care, and other priorities, or find more revenue.
The best way to create a sustainable revenue stream is through a progressive income tax structure. That will mean the wealthiest Coloradans will finally pay their fair share, while lower- and middle-income Coloradans will not pay more and see significant community investments. Without a real shift in the state’s fiscal structure, the current year’s budget will be an outlier, and we will not be able to sustainably support the kind of state Coloradans want and deserve.
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