How Colorado’s Legislature Targeted Relief in 2022
Colorado’s 2022 legislative session was an important lesson in how lawmakers can react responsibly in using additional funding in the right ways to support working families, and trim or delay costs in response to economic conditions such as high inflation and rising costs. We saw cash back to taxpayers structured in ways that will help those who need it most, and we saw thoughtful actions to reduce fees and other expenses for Coloradans.
Instead of each family and individual paying large costs out-of-pocket for necessary functions, like renewing a drivers’ license, filing for business purposes, or getting credentials to further one’s career, the government can use tax dollars to subsidize these costs. Usually, Colorado’s strict tax and budget limits forces our state to operate on a shoestring budget, leaving many of these costs to everyday Coloradans. This year’s temporary, highly funded budget allowed Colorado to see what could happen if our state had revenues to support its people in times of need.
This session was crucial in providing some direct and temporary relief to all Coloradans in a variety of ways. Let’s take a quick look at the kinds of bills that passed in this space and what it could mean for Colorado
Changes to the Tax Code
While there are restrictions in our state constitution regarding how policymakers can make changes to the tax code, there are still a multitude of ways that the legislature can wield tax policy to ensure more fairness, more equity, and save Coloradans money. Generally, these changes come in the form of tax credits, exemptions, and deductions that incentivize certain behaviors or help Coloradans more generally.
For tax credits to be most effective in a state with a balanced budget, they should be targeted. Those who need help should receive it, but the wealthy do not need more tax advantages.
Here’s what tax changes were made in 2022, with costs to the state in parentheses:
- HB22-1205 – Senior Housing Income Tax Credit ($50m): This bill allows older adults with annual incomes below $75,000 and who do not qualify for the Senior and Disabled Veteran Homestead Property Tax Exemption to get a $1,000 tax credit on their rent or mortgage in tax year 2022. This targeted tax credit – using funds that are coming out of the TABOR surplus – will allow older adults, especially those on fixed incomes, to stay in their homes amid rising housing costs.
- HB22–1010 – Early Childhood Educator Tax Credit ($13m): This bill gives tax credits to approximately 11,000 early childhood education workers who receive certain credentials. These tax credits will be available through fiscal year 26-27.
- HB22-1223 – Mobile Home Property Tax Sale Notice and Exemption ($833,193): Mobile home owners whose property is below $28,000 will receive a tax exemption that helps them afford staying on their lot. The money from the state will go to backfill lost property tax revenues for school districts.
- HB22-1007 – Assistance Landowner Wildfire Mitigation ($367,000): A growing concern for many Coloradans is fire. This bill extends a current tax credit through 2025 that is meant to offset landowner’s wildfire mitigation costs and creates a tax exemption for landowners who mitigate fire hazards on their property.
- HB22-1406 – Qualified Retailer Retain Sales Tax ($39.3m): When the pandemic hit, there was a lot of consternation about ensuring that restaurants and other food and drink retailers would be able to stay open. One of the policies the legislature put in place was to temporarily allow these establishments to keep the sales taxes collected. This bill continues that practice for 86,000 businesses across Colorado during the summer of 2022.
Reduction or Elimination of Fees
Fees are costs charged to people or businesses for specific services they utilize and the revenue from those fees must pay for related activity. For example, power plants and utilities are charged fees to operate, and the state uses that revenue for regulating the industry and enforcing the relevant laws. But there are many fees in our state, and some of them hit low- and middle-income Coloradans. The legislature found ways to use money in the General Fund to temporarily reduce or eliminate some of these fees to try and help those Coloradans who are struggling to make ends meet. Some of the fee changes from 2022:
- HB22-1001 – Reduce Fees for Business Filings ($16.71m): This is a simple bill that uses money from the General Fund to reduce many business filing fees to $1 for this year. These fees include annual registration, trade name registration, and update to business information.
- HB22-1004 – Driver License Fee Reduction ($3.9m): Renewing or getting driver’s licenses costs money, and the legislature used nearly $4 million to keep that fee from increasing this coming year, saving Coloradans some money.
- HB22-1298 – Fee Relief Nurses, Nurse Aid and Technicians ($11.7m over two years): Many occupations require credentialing on a regular basis to remain in good standing. This bill will eliminate the credentialing fee for nurses, nurse aids, and technicians for two years.
- HB22-1299 – License Registration Fee Relief for Mental Health Professionals ($3.7m): This is another bill to reduce credentialing fees for certain jobs – this time for mental health professionals.
- HB22-1133 – Family and Medical Leave Insurance Fund ($57m) – Paid Family and Medical Leave was approved by voters in the 2020 election and this is the first year that employee and employer premiums are to be paid to stand up the program. This bill prepays the premiums for one year that would have been owed by the state for state employee leave. That pre-pay will help infuse the program with money to pay out when paid family and medical leave starts in 2024.
- HB22-1351 – Temporarily Reduce Road User Charges ($78.5m): The legislature passed a big transportation bill – SB21-230 – in 2021 to provide a sustainable source of funding for statewide transportation infrastructure. One of the sources of sustainable funding was a new 2 cent fee on gasoline. With the influx of federal funds from the bipartisan infrastructure bill passed by Congress in 2021, along with rising gas prices, the legislature and the governor decided to use General Fund money to postpone the introduction of the gasoline fee for one year.
- SB22-006 – Sales Tax Assistance for Small Business Filings ($2.5m): The vendor fee is a percentage of sales taxes collected that businesses keep as compensation for sending sales taxes to the government. This bill will allow businesses with less than $100,000 in monthly sales – which affects more than 58,000 retailers – to keep a larger percentage of their sales for this purpose.
Rate Cuts and TABOR Rebates
There were two major bills that passed at the end of session to save Coloradans money that don’t fit neatly into the two boxes above. That’s because these bills have parts that target relief to the people who most need it, while also giving broad relief to all Coloradans – including the wealthy.
Here’s how they work:
- SB22-233 – TABOR Rebate Mechanism for 2021-22 Only ($1.706B): This bill changed the TABOR sales tax rebate mechanism that is responsible for nearly $2 billion going back to taxpayers this year. Instead of relying on a formula devised in the late 1990s that would have given Colorado millionaires much more than everyone else, this bill will give $500 checks to all Coloradans. However, TABOR’s temporary income tax cut is still in place and will funnel 24 percent of the tax cut to the top 1%.
- SB22-238 – 2023 and 2024 Property Tax ($408 billion in FY22-23): With home values rising, there was a desire to find a way to reduce property taxes. The legislature and the governor agreed to use tax exemptions and rate cuts to deliver property tax relief. Tax exemptions are a way to reduce the amount of property value that is eligible for taxation and can be progressive, as it relies on a flat amount of money to exempt, as opposed to a percentage. That ensures that a higher percentage of relief can go to those who need it most. In this bill, the first $30,000 in property value is exempt from taxation. However, also contained in the bill is a reduction in the assessment rate for both commercial and residential property owners. This will deliver more relief to the people with the highest value properties, allowing wealthy homeowners to see significant savings.
Conclusion
The legislature had more money in its budget than in almost any prior year, allowing the body to be responsive to economic conditions. For the most part, much of that excess money couldn’t be used to build new programs, because it will likely not be there in continuing years. Therefore, finding one-time uses for the dollars was tricky. With rising costs at the forefront of many peoples’ minds, allowing small businesses and hardworking Coloradans to keep more money or give them money in the form of tax changes made a lot of sense. Government is in place to help people and facilitate services that are too difficult for private markets to undertake. This year was a great example of how governments can step in to help defray costs when individuals need it most. However, going forward we need to be more thoughtful about who gets relief and in what ways we do it. We want to make sure that we build a state that helps people who need it and where everyone pays their fair share. This session was a good starting point, but we need to elevate this conversation to ensure fiscal and tax fairness for Coloradans, and economic relief for those who need it most.
