From a Means of Oppression to a Tool for Progression

I learned three lessons about taxes while growing up: 1) They take a chunk out of your paycheck, even when it’s your first one 2) The number on the price tag is less than what you’ll actually pay and 3) Tax time in the Turcios house always meant my parents got a refund — which also meant my brothers and I would get a gift!

As I got older and started working my first real job (shout out to Macy’s) I came to dislike taxes. I didn’t understand what FICA was or how exactly Social Security worked. All I knew was that my feet hurt from standing all day ringing up purchases, only to have my paycheck reflect less than what I thought it should be.

Not only was I experiencing the same despair that I saw my parents struggle with, I was also experiencing the same frustration I saw reflected in my community since I was a young girl. Hundreds of immigrant families like mine were working one, two, even three jobs to make ends meet and taxes seemed to be making it harder. But it always felt like there was nothing we could do about it, taxes sucked and it was just a part of life — or so I thought.

In 2017, I joined the CFI team as a State Policy Fellow. To be honest, I had no idea what tax policy was at the time. All I knew was that I was a recent (broke) social work graduate who wanted to be part of systems change work and who needed a job. But then I started learning ALL about taxes — their history, how they’re collected, who they’re collected from, and how they’re used to fund public investments. And I learned that taxes themselves aren’t bad, they’re just a tool. And like any tool, they can be used properly or improperly.

What I Learned about Colorado’s Regressive Tax Code

• Coloradans who earn the lowest incomes pay the highest percentages of their income in state and local taxes.
• Coloradans who make the lowest incomes pay the exact same income tax rate (4.4%) as the richest Coloradans like Denver Nuggets basketball player Nikola Jokic and Colorado billionaires like Philip Anschutz.

Why does Colorado have such an upside down tax code? Because of misguided tax policy decisions made through the ballot and the legislature. In 1992, Colorado voters chose to support the passage of Initiative 1, which added the infamous Taxpayer Bill of Rights (TABOR) to our state’s constitution. TABOR is the most restrictive tax policy in the nation and has given birth to some of the worst outcomes for Coloradans across the state, especially for BIPOC Coloradans. If you are a Black or Latinx Colorado taxpayer, you are both more likely to earn a lower income and are more likely to pay a higher share of that income in taxes than are white Coloradans.

The Racist Roots of American Tax Policies

You can imagine how furious I was learning about tax policy in our state, and even more so learning about the racist history of tax policy in this country. Take Mississippi for instance. In 1935, Mississippi adopted the nation’s first modern sales tax, a tax that generally falls hardest on people with the lowest incomes. Then Governor Mike Connor successfully pushed the all-white male legislature to adopt it by arguing, in part, that doing so would keep property tax rates down for white property owners, and make Black Mississippians pay more taxes overall.

Or California. During the gold rush years of the 1850s, California imposed a special tax on immigrant miners; U.S.-born whites were not subject to the tax. The tax fell on immigrant miners of European descent as well as those from China and Latin America, but for a period in 1855 and 1856, the state imposed an additional tax solely on immigrant miners ineligible for citizenship, mainly Chinese and Latinx miners who were legally barred from becoming U.S. citizens because they were not “free white persons.”

So what was a woman to do with all this knowledge about tax policy? Become a tax ambassador of course! A tax ambassador is a knowledgeable advocate prepared to talk to our fellow Coloradans about crafting more equitable fiscal policies.

Yes, it was hard to learn the racist history of tax policy, especially as a Latina. But I also found it oddly empowering. It finally put into perspective how my parents, community and I felt. Taxes have indeed been used as a tool of oppression against poor and working class people, especially people of color, so our feelings were not out of line. We were right to feel burdened by taxes, because those making policy decisions chose to use them in a way that is burdensome to us.

But it does not have to continue being this way. Taxes are clearly a powerful tool, and just like they’ve been used as tools of oppression, they can be used as tools to create resilient and thriving communities. When we stop thinking about taxes as money the government takes from us and start thinking about them as a collective pot of funds that help pay our teachers, pay for paved roads, and pay for our beautiful parks and open spaces, we can see the ways in which we can all benefit from them.

You can’t change what you don’t understand. I didn’t understand that I could help influence tax policy, let alone make a career out of it! But once we join the conversation, we may change our perspective about taxes. Then we can advocate for tax policies like the Earned Income Tax Credit and Child Tax Credit – two of the nation’s strongest tax policies to pull children and families out of poverty. Or we can vote for policies like Proposition FF on our ballot, which ensures wealthy Coloradans pay their fair share in taxes so we can fund healthy breakfast and lunch meals for all Colorado kids in public schools.

So what are three lessons I carry about taxes today? 1) They are a neutral tool — it’s the policies that govern them that can either be used to create healthy and thriving communities or to oppress, 2) they are not race neutral and we must understand their history in order to rectify the impact of racist policies, and 3) we all have the power and responsibility to advocate for people-centered tax policies.

Esther Turcios is the Deputy Director of the Colorado Fiscal Institute.

Snow is on the ground, Spring is in the air, and the Colorado legislative session is more than halfway through! And, our renewed state budget is once again stifled by an arbitrary revenue and spending limit set by the Taxpayer’s Bill of Rights, or TABOR. 

Colorado is returning $1.82 billion to taxpayers this year. Though this surplus is less than the unprecedented $4 billion the state government returned last year, it’s still one of the largest TABOR surplus we’ve ever had.

What should we do with this windfall? CFI thinks our surplus should go to critical General Fund priorities, like paying teachers, increasing Medicaid reimbursement rates, and lowering tuition at our public universities. But because of TABOR’s arbitrary revenue and spending limits, they can’t.

Instead, CFI, partners, and legislative champions have come up with ways we can spend down the surplus and still use our state revenue to help all Coloradans thrive. With a combination of new credits, and increasing existing credits, Colorado can significantly reduce child poverty and help families and workers cope with the rising cost of living. 

• HB24-1134 expands the Earned Income Tax Credit to 50% of the federal credit permanently, combines two Child and Dependent Care Credits to prevent a coverage gap, and updates our corporate income tax structure to bring us in line with other states.
• HB24-1311 creates a permanent new Family Affordability Credit that acts as a Child Tax Credit boost and is contingent upon TABOR surplus dollars. The Family Affordability Credit adds to the credit amount that families will receive from the CTC, it expands the incomes that can receive the credit to $85,000 for single filers and $95,000 for joint filers, and expands the age eligibility for kids so that families with kids between the ages of 6 and 16 can receive the credit. 
• HB24-1312 creates a temporary new Care Worker Credit that provides a tax credit to child care workers, home health-care workers, personal care aides, certified nursing assistants, or other qualifying personal care workers including a family member, friend, and neighbor who provides care.

If legislators do nothing, most of our TABOR surplus is returned to the wealthiest taxpayers in the state. We know that putting money into the hands of low income earners reduces poverty and boosts spending, workforce participation, and tax revenue that benefits everyone. With our limited options, using the surplus to invest in this population is the best way to spur our economy.

By Caroline Nutter, Legislative Coordinator 

DENVER – March 15, 2024 – Today, MacKenzie Scott’s Yield Giving announced Colorado Fiscal Institute as one of the Yield Giving Open Call’s awardees working with people and in places experiencing the greatest need in the United States. Colorado Fiscal Institute received $1 million.

The Colorado Fiscal Institute (CFI) is a women-of-color led organization that was created to partner with communities who face the greatest barriers to economic prosperity and wealth-building – Black, Indigenous, people of color, especially women of color, immigrants, and people who earn the lowest incomes – to bring about change in Colorado’s tax system. At its core, a tax system is all about how communities raise money and solve problems together. Since its inception, CFI has advocated alongside the community for tax policies that work for all Colorado workers and their families — not just the ones for whom our economy already benefits.

Since 2012, CFI’s work has focused on amplifying the voices of these communities at our state capitol where laws are made and passed, through education, advocacy, and training. Outside the capitol, CFI uses innovative civic engagement strategies and popular education programs, such as the six-week Tax Ambassador train-the-trainer program, to support people to become champions for tax and economic justice within their own communities. 

In March 2023, Yield Giving launched an Open Call for community-led, community-focused organizations whose explicit purpose is to enable individuals and families to achieve substantive improvement in their well-being through foundational resources.

“We’re deeply grateful to receive this generous gift from MacKenzie Scott. It’s a testament to the efforts of our incredible staff, current and former board of directors, amazing local funders and supporters who’ve been with us all this time; and of course, to our community partners, with whom we’ve been working toward our shared vision of a state where our fiscal and economic policies support equity and widespread prosperity,” said CFI Executive Director Kathy White. “We’re excited to embark on an intentional and collaborative process with our board and our community to determine how we can best use these one-time funds for lasting impact to our organization, our community, and our movement for economic justice.” 

The Open Call received 6,353 applications and awarded 361 organizations with a total of $640 million. In the Fall of 2023, organizations top-rated by their peers advanced to a second round of review by an external Evaluation Panel recruited for experience relevant to this cause, and underwent a final round of due diligence. In light of the incredible work of these organizations, as judged by their peers and external panelists, the donor team decided to expand the awardee pool and the award amount. 

“We are excited that our partnership with Yield Giving has resonated with so many organizations,” said Cecilia Conrad, CEO of Lever for Change. “In a world teeming with potential and talent, the Open Call has given us an opportunity to identify, uplift, and empower transformative organizations that often remain unseen.” 

More information on the Yield Giving Open Call and other initiatives can be found at www.leverforchange.org.

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Colorado Fiscal Institute

The Colorado Fiscal Institute uses research, advocacy, strategic communications and statewide education to promote responsible, people-centered, fiscal and economic policies that advance equity and widespread prosperity in Colorado. To learn more, visit www.coloradofiscal.org. 

Yield Giving

Established by MacKenzie Scott to share a financial fortune created through the effort of countless people, Yield Giving is named after a belief in adding value by giving up control. To date, Yield’s network of staff and advisors has yielded over $16,500,000,000 to 1,900+ non-profit teams to use as they see fit for the benefit of others. To learn more, visit www.yieldgiving.com. 

Lever for Change

Lever for Change connects donors with bold solutions to the world’s biggest problems—including issues like racial inequity, gender inequality, lack of access to economic opportunity, and climate change. Using an inclusive, equitable model and due diligence process, Lever for Change creates customized challenges and other tailored funding opportunities. Top-ranked teams and challenge finalists become members of the Bold Solutions Network—a growing global network that helps secure additional funding, amplify members’ impact, and accelerate social change. Founded in 2019 as a nonprofit affiliate of the John D. and Catherine T. MacArthur Foundation, Lever for Change has influenced over $1.7 billion in grants to date and provided support to more than 145 organizations. To learn more, visit www.leverforchange.org. ​

It’s time for another Forecast Five, where CFI gets down in the details so you don’t have to. Check out our top five takeaways from the Legislative Council’s presentation on the economic and fiscal outlook for Colorado.

1. TABOR Cap means the budget can’t keep up.

We can’t stay even budgeting to the Referendum C cap. The General Fund is projected to have $938 million available to spend relative to what was budgeted in FY2023-24 — but we can’t use it for anything new. When we account for caseload growth, inflation, and other budgetary pressures, we actually need an extra $1.2 billion to keep up with operational costs. In fact, we’ll need to find the $262 million difference somewhere. Legislators are proposing to lower our 15% reserve — our rainy day fund — to 13.3% to keep us even.

2. Higher cash funds and slower population growth means a tighter General Fund.

Back in December, the TABOR Cap was expected to grow 6.1%. Now the inflation and population growth rates are finalized, the TABOR cap will only grow 5.8%. This impacts how much revenue the state is allowed to keep and spend. A lower growth of the cap means $54 million fewer dollars the state has to spend relative to what we thought in December. 

Severance tax, transportation fees, and other cash funds also impact how much revenue the state can use. When cash funds go up, it means higher TABOR rebates must be paid out of the General Fund. Transportation cash funds are up because new road usage fees fully came online this year and some other transportation fees, which were lowered in the past two years, are back to their full level. This combination means higher TABOR rebates, but fewer dollars to spend on roads and schools.

3. Inflation is easing while unemployment ticks up.

After the dip from the pandemic and a short, unsteady recovery, economic growth has returned to normal — and actually exceeded expectations. Consumer spending has picked back up after the come-down from the pandemic spike, and inflation is slowly, but surely, coming back down. After the labor market raged from mid-2021 onwards — Colorado added 18,600 jobs from June 2021 to January of this year — our employment gains are slowing, and our unemployment rate is ticking back up. Though we are still below the national average of 3.9%, we are anticipating a 3.7% rate over the course of 2024. 

4. The economy avoided a blow-out loss.

As the Federal Reserve has pursued aggressive monetary policy — raising interest rates — to tamp down inflation, many feared it would trigger an economic slow down.  But the GDP growth at the end of 2023 and 2024 was surprisingly strong. Growth of the economy is comparable to moderate economic expansion. Seems we’ve tamed inflation without a recession. Consumer spending is strong although there is some weakening in the retail and food service sectors, which could signal that consumer spending may be strained in the future. Another positive has been the real wage growth in the past several months. As inflation is dropping, nominal wages are outpacing price increases. This means real wage growth.

5. Housing is still the biggest foul on Colorado consumers.

Although inflation is slowing, some components are changing faster than others. At the height of the pandemic, soaring transportation costs made up the bulk of the state’s cost of living increases — but starting in 2022, and stubbornly sticking around until now, housing inflation has contributed the most to the headline inflation rate. Transportation, food, and beverage inflation have all come down significantly in the last two years, and housing inflation is persistent, floating between three and four percent for the past 24 months. With households spending a greater share of their budgets on housing, they are saving less. The national savings rate, currently sitting at 3.8%, is below the historic average of 5.7%.

Last summer, the U.S. Department of the Interior proposed new rules to modernize the Bureau of Land Management’s (BLM) oil and gas leasing program on federal lands. The goal is to ensure taxpayers receive their fair return, balance environmental protections, and discourage speculation. Key proposed changes include:

• Increasing bonding requirements for leases to $150,000 minimum and $500,000 statewide to better cover potential cleanup costs if companies default. This updates outdated 1960s-era bonding levels.
• Steering leases away from wildlife habitat and cultural sites toward lands with existing infrastructure.
• Raising onshore royalty rates to 16.67% minimum, better aligning with offshore and state rates. Rates hadn’t changed in over 100 years prior.
• Codifying an increase in minimum bid price per acre from $2 to $10, with inflation adjustments thereafter.
• Increasing annual rental rates per acre to new minimums of $3 for the first 2 years and $5 for the next 6 years before reaching $15 thereafter.
• Adding a 5% per acre fee for expressions of interest in pieces. 

The proposed rules codify recent legislative changes and aim to modernize the BLM oil and gas leasing program with fiscal reforms to increase public returns, enhance protections, and reduce speculation.

Oil and gas leases continue to be issued in Colorado without these modernized rules, and we the public bear the negative consequences. Outdated policies mean lower returns for taxpayers and inadequate protections for wildlife, habitats, and cultural sites in our state. Weak bonding requirements also mean oil and gas operators can walk away without cleaning up their wells and infrastructure, leaving the cleanup costs to fall on the public.

That’s why it is urgent for this proposed federal rule to be finalized as soon as possible. Once implemented for Colorado BLM leases, the $150,000 minimum lease bonds and $500,000 statewide bonds will give these operators much greater incentive to fulfill their obligations. Steering leases away from sensitive areas will limit habitat destruction. We’ll see fairer royalty rates better aligned with state and offshore levels – rates that haven’t changed at the federal level in over a century.

Most critically, we need assurance that oil and gas operators will clean up after themselves on our public BLM lands. the proposed increases to outdated, 1960s-era bond levels will help avoid situations where reclamation costs fall to taxpayers. Taxpayers for Common Sense estimates that outdated leasing terms have cost Coloradans an estimated $838 million in lost potential revenue. Taxpayers additionally face up to $371 million in likely reclamation expenses down the road. Higher bonds paired with reforms to rental rates and speculation disincentives will shift accountability firmly onto lease holding companies. 

Finalizing these modernized rules quickly is imperative and urgent for Colorado’s lands, wildlife, resources and people. The longer outdated policies govern BLM’s onshore oil and gas leasing here, the more ripple effects our communities must bear from unfair returns, insufficient protections and reclamation liabilities. We must bring accountability and balance to this program now.

Why EITC Awareness Day?

Colorado Fiscal Institute advocates for tax and budget policies that make economic prosperity for every Coloradan a reality. In this pursuit, we back targeted, common-sense policies that invest in and help build power for Coloradans who earn middle and low incomes. The Earned Income Tax Credit (EITC) is a prime example of a targeted tax policy promoting equity, and has long been among CFI’s top priorities.

The EITC is a refundable, cash-back tax credit for families who earn low incomes. This means families could get money back even if they owe $0 in taxes in a given tax year. Originally enacted at the federal level in the 1970s, the policy has a history of bipartisan support, and its efficacy is backed by decades of research. Children in families who claim the EITC have better outcomes at birth, improved education outcomes, and increased lifetime earnings. Colorado should do all we can to ensure families are able to find and claim this and other refundable credits (i.e. the Child Tax Credit) they qualify for.

Friday, January 26, 2024 is EITC Awareness Day. Each year, CFI collaborates with partners, legislators, and supporters in the effort to uplift the EITC, and spread awareness of its importance as a policy. EITC Awareness Day is a national effort CFI is proud to take part in. This year, in honor of the largest EITC in our state’s history, the Governor has issued a proclamation honoring the day. We have written a brief overview of where the state EITC stands today, outlined some points for continued improvement, and compiled an index of resources on all things EITC.

Expansions to the Colorado EITC

Since 1999, CFI, along with advocates, community members, and legislative champions, has been at the forefront of advocating for the implementation of, expansion to, and outreach efforts for the EITC — and we’ve won. In 2013, Senate Bill 001 made the state EITC permanent and set the credit amount at 10% of the federal. In 2020, we made the credit available to people who file taxes using an ITIN and in 2021 we doubled the credit amount to 20%. Most recently in 2023, Colorado increased the state credit to a 50% match of the federal EITC. These expansions of the EITC in the last several years have helped make Colorado’s tax code more fair.

Successes in our state have been part of a national trend toward recognizing the impact and importance of direct cash to families. As described in one of our fall blogs, federal relief efforts during the COVID-19 pandemic — including a temporary expansion of the federal EITC and CTC — helped produce the lowest child poverty rate on record. Expiration of these temporary expansions have left families without the support they need and deserve in their endeavors to thrive. Whether at the federal or state level, EITC expansions, Child Tax Credit (CTC) expansions (like the one currently on the table in D.C.), and like investments in the people who keep our economy going will make our country, state, and communities more equipped to prosper during the good times, and endure during bad.

Uptake and Future of the EITC

However, even with all of this progress, there is much work to be done, in particular during the 2024 legislative session. Expansions to the EITC are set to expire in the next two years. Without legislative action, Colorado’s EITC will be cut by more than half, declining to 20% by 2026. In order to maintain and further the progress Colorado has made in our tax code, these expansions must be made permanent.

Additionally, Colorado needs more outreach and policy intended to increase the uptake rate of the state EITC; in 2020 in Colorado, more than one quarter (28%) of those eligible for the EITC did not claim the credit. We know people are working extra hard to make ends meet, and Colorado must do more to ensure families don’t leave money on the table because they don’t know about the tools available to them.

Resource Index

To continue building on all of the EITC policy wins, CFI has compiled an index of tools for organizations interested in helping their supporters and members access resources, or for individuals looking for information about the EITC and other refundable tax credits they may be eligible for.

For Individuals

• Tax Help Colorado – Tax Help Colorado provides free tax preparation services, helping you receive the refund you are owed. 
• Get Ahead Colorado – Get Ahead Colorado is a public information campaign encouraging tax filing from the Colorado Department of Public Health and Environment (CDPHE). 
• Get It Back Campaign – The Get It Back Campaign helps eligible individuals claim tax credits and use free tax filing assistance to maximize tax time.
• IRS EITC Information – Check if you qualify and learn how to claim the credit.

For Organizations and Partners

• CFI’s EITC Day 2024 Digital Toolkit
  • CFI EITC Infographic
• Get Ahead Colorado
  
  • EITC Awareness Day Messaging
  • Partner Toolkit
• Get It Back Campaign
  • Outreach Resources
  • Refundable Credits Flyers
• Prosperity Now EITC Awareness Day Resources
  • PN CO factsheet
• IRS EITC Awareness Day Tool Kit
  • EITC Awareness Day Messaging
  • Partner Toolkit

New year, new legislative session — same old blind spots about income taxes. We shared our thoughts with CO Politics about Gov. Jared Polis’ plans to cut taxes in his 2024 State of the State (watch). In a word: counterproductive. 

“Tax relief is the best mechanism to relieve cost of living pressure and spur economic growth for everyone in our state.” – Gov. Jared Polis

Tax dollars are key if we’re going to reach moonshot goals like remedying Colorado’s crumbling public education system, lack of affordable housing and environmental crisis. 

As Gov. Polis said, we can accomplish anything if we work together. Let’s work together to reform tax policy, so that when our state turns 150 in 2026, we can touch the stars. 

Continue reading for three fiscal facts about taxes in Colorado everyone should know, no matter their side of the aisle.

1. Slowing Inflation Points to Lowering Interest Rates in 2024

Tight monetary policy throughout 2023 (i.e. raising interest rates) had its intended effect of curtailing headline inflation. After an 8% inflation rate last year, we are looking at a 5.2% rate in 2023, then getting closer to what we’ve been used to at 3.5% the following year. Still, inflation in November in Colorado was higher than the rest of the U.S. Inflation was 4.5% in Colorado compared to 3.1% in the U.S. Higher housing and medical care costs in Colorado are driving that difference. With inflation abating, the forecast predicts that interest rates will be cut in 2024.  Inflation is one of the reasons households are saving less. Household savings, which were bolstered during the pandemic (particularly among households that were able to keep working), have fallen below historic averages. Households are currently saving 3.8% of income compared to the historical average of 5.7%. This indicates that households may start to spend less, which could increase recession risk in the future.

2. Jobs Forecast Consistent with Long-Run Expansion

Colorado’s unemployment rate of 3.3% is below the national rate of 3.7%, but it has ticked up from 2.9% back in July. The economic slowdown has impacted employment in some sectors more than others — while job gains were made in government, leisure and hospitality, and education and health services, the trade, transportation and utilities, construction, and financial activity sectors all saw overall job losses. Colorado’s economy is expected to grow 2.5% in 2023 thanks largely to a big third quarter. Despite an uptick in unemployment, there’s signs that real wages are growing.

3. General Fund Outlook for Next Year’s Budget: Not Quite Staying Even

There’s expected to be $1.15 billion more revenue to spend in next year’s budget (FY2024/25) compared to this year’s budget — but once you account for things like caseload growth and inflation, that all essentially disappears.  In fact, if you assume the governor’s recommendations for next year’s budget, we will be $84 million short of the 15% statutory general fund reserve requirement. This means there isn’t any new money for new public investments — we just maintain.

4. TABOR Rebates Still on Horizon but Smaller than Last Two Years

Don’t get used to $3 billion plus TABOR surpluses. Each tax filer will get $800 back from the state when they file their income taxes for tax year 2023 (they aren’t mailing checks like last August). The past two years with over $3 billion in TABOR rebates had a lot to do with historic corporate income tax collections, which are expected to come back down to earth.  After a 50.9% increase in 2022 following big increases in 2021, the forecast expects a 16.5% decline in corporate income taxes this year. Declining corporate income taxes collections means less revenue above the Ref. C cap, which means less revenue in TABOR rebates

5. Schools: Enrollment Declines, Uncertainty about Local Share, Zero BS Factor?

The special session added uncertainty to this year’s school finance projections. Policies set during the session will impact property taxes, so the extent to which local property taxes will fund schools isn’t 100% clear yet.  But, rising property tax collections have boosted the odds of finally zeroing out the annual shortfall in school funding known as the budget stabilization factor — though the balance in the State Education Fund will decline over the next several years to achieve that goal. Student enrollment continues to decline as a result of lower birth rates. The biggest decline in students occurred in the Denver area while areas of the state with relatively cheaper housing costs, like Colorado Springs, have seen growth in students.