Capitol Gains: Duck, Duck, Goose
By Ali Mickelson
Director of Tax and Legislative Policy
Most of us remember sitting in our elementary school gymnasium anxiously awaiting that tap on the head. Your classmate moves slowly around the circle, delicately patting hat after pigtailed head, until finally, when the of suspense had nearly engulfed you, he yells “goose!” and breaks into a sprint to secure his spot before getting tagged from behind.
So goes the game “Duck, Duck, Goose,” one we look upon fondly in memories but rarely play beyond the fifth grade. But now the Colorado General Assembly is poised to invent a new, adult version of this childhood favorite disguised as an overhaul of our state college savings plan.
House Bill 17-1007 creates a tax break for employers who contribute to an employee’s 529 CollegeInvest savings plan. This bill allows employers to take a double deduction for contributions to employees’ college savings plans while simultaneously requiring employees to pay state tax.
This policy is kind of like Duck, Duck, Goose, but with a nasty twist. Employers first “duck” their tax liability by deducting their contribution as employee compensation. Then, under the bill, they’d “duck” their tax liability on an authorized 529 contribution. Meanwhile, employees would get “goosed” with the tax on the employer contribution, as it would be considered income to the employee.
Let’s be honest. This game sucks.
Without this bill, employers can still contribute to an employee’s 529 plan. If an employer wants to contribute, they can put money into an employee’s plan and still deduct that cost as employee compensation. This bill simply creates another tax loophole that allows for the state 529 deduction in addition to the compensation deduction.
Higher education is becoming less and less affordable for Colorado families, and college savings is more important than ever. However, Colorado’s 529 program already disproportionately benefits the wealthiest Coloradans. It should be a priority of the General Assembly to help low- and middle-income families find ways to increase savings for college. But this bill is not targeted at families that most need support and instead opens the door for further inequities in our 529 program while reducing state revenue available to fund higher education.
CFI is fighting to make sure the game is fair and Colorado families don’t become a permanent goose. We will be testifying against HB17-1007 when it goes to the House Education Committee, currently scheduled on Feb. 22. Join our fight by contacting your Legislators and asking them to vote “no” on Duck, Duck, Goose.
