DENVER — Between high costs and a shaky economy, a lot of families in Colorado are struggling to make ends meet. For a second year in a row, state lawmakers are focusing on cutting expenses in the form of tax and fee relief in an effort to help.
This year, three of the bills that have been introduced are aimed at helping families, particularly those still struggling after the pandemic
One bill Colorado lawmakers are debating this year would give more money to parents who are out of work.
“Right now, Colorado doesn't have anything for dependents. And that often means that families who are going through a job loss can really see a huge hit to their family budgets, and it can often have a big negative effect on kids,” said Sen. Chris Hansen, D-Denver.
House Bill 23-1078 would offer an additional $35 per week per dependent child in unemployment compensation starting in 2025. That amount could then be adjusted annually for inflation or based on the parent’s average weekly wage during their highest-earning quarter.
The money would come through the Unemployment Insurance Trust Fund that workers and businesses pay into each year.
“The family receives the money, and then they can spend it [on] ... what they need the most. And we know that this has a big impact on child nutrition and child poverty,” Hansen said.
The bill would add around $15-18 million in benefits to the UI fund each year. Currently, around a dozen other states offer similar compensation for kids.
However, many in the business community are opposed to the legislation including the Colorado Banker’s Association, the Colorado Competitive Council, the Colorado Association of Home Builders, the Colorado Chamber of Commerce and more.
Many of the opponents worry about the additional financial burden this bill will place both on employers who are still recovering from the COVID pandemic and paying higher premium rates into the UI fund as it is. They are concerned that further reductions to the UI fund as employers work to bring the fund back into solvency.
During its first committee hearing, others argued that the UI is not a child support program and questioned whether this is something that the state should be getting involved in.
The bill passed its first committee test earlier this month and is continuing through the legislative process.
Earned Income and Child Tax Credits
Another bill Colorado lawmakers are considering this year aims to expand the state’s earned income tax credit and child tax credit for employees starting in 2024.
For the earned income tax credit, the current iteration of House Bill 23-1112 would increase the earned income tax credit from 35% of the federal rate to 40% of the federal rate.
Meanwhile for the child tax credit, starting in 2024 the credit amount would be increased based on the taxpayer’s filing status and income. The percentage the filer could claim would increase by roughly 10% in each earning bracket.
“It's a tax credit that's unique in that it encourages and rewards work. So, for each dollar that a working person earns, you begin to earn a tax credit. As you earn more money, the benefit of that tax credit is phased in over time, until you reach a maximum level,” said Rep. Shannon Bird, D-Westminster.
Colorado is one of 29 states that offers its own version of the income tax credit to supplement what is already being done on a federal level.
Bird says the additional tax credit can help families save anywhere from $500-$3,000 extra each year, which can help with some of their daily expenses or pay for home or car repairs.
“What has been done so far at a federal level also was credited with lifting over 5.6 million people out of poverty, including 3 million children. So, this is one of the most effective measures that we can take to encourage work, and also lift people out of poverty,” Bird said. “The hopes that I have for this bill is that Colorado will be strengthening its social safety net and really being a partner to families who are working hard trying to make ends meet.”
Because the bill has such a high fiscal note, however, Bird admits that the legislature will need to pare back several of the provisions so that the state can afford these allowances for families. Right now, the fiscal note says the current iteration of this legislation will cost the general fund more than $391.7 million annually.
Nevertheless, Bird and the bill’s sponsors are hopeful that they will be able to come to some sort of a compromise to save Colorado families and workers money.
Incentives for Child Care
A third bill lawmakers are considering this year that is child-specific is working to incentivize affordable housing developers to include space for childcare centers within their designs.
“Childcare has been the bane of my existence, I can only imagine for other Coloradans. It's really stressful to figure out, especially post COVID, going back into the workforce, what that looks like,” said Rep. Rose Pugliese, R-Grand Junction.
House Bill 23-1091, which has bipartisan support, extends the child care contribution tax credit through 2027 and expands the types of contributions that qualify to include in-kind donations of real property.
The current tax credit is set to expire in 2024 without this legislation. Pugliese hopes that this bill will help rural areas in particular create spaces to offer more childcare options for families so that parents can get back to work after the pandemic.
“In these affordable housing conversations, when developers are building, they're looking to set aside some space for childcare, which is great if you're able to kind of work and live in the same place and know that your children are safe while you're doing it. That's a really big deal for Colorado families,” Pugliese said.
The bill passed its first committee hearing at the beginning of February and is awaiting a hearing in the appropriations committee. It’s expected to cost the state $19.6 million in 2024-2025 and another $39 million the following year.