By Ali Mickelson

Same-sex couples and allies across America were overjoyed with the long-awaited Supreme Court decision to overturn the Defense of Marriage Act (DOMA) in June of 2013. Yet with this landmark decision came new questions regarding shared benefits and financial planning.  One of the big questions centered on tax planning and how same-sex married couples would file their taxes in the post-DOMA era. 

After much speculation, on August 29, the Internal Revenue Service (IRS) announced that beginning in 2014, same-sex married couples will be permitted to file as married on their tax returns and receive the same benefits (and penalties) of any other married couple.  The IRS also clarified that as long as same-sex couples were married, it doesn’t matter which state they reside in, nor does it matter if that state recognizes same-sex marriages.  Calling this the “state of celebration” standard, the IRS determined that any couple who has a marriage license in the United States can file as a married couple for federal tax purposes.  However, those with a civil union or domestic partnership who are not married will not be able to file as married on their returns. 

While this decision by the IRS brought clarity to federal filings, questions still remain regarding state filings.  Colorado does not recognize same sex marriage, only civil unions.  If someone who resides in Colorado is married in a state that does recognize same-sex marriage, they can file as married on their federal return, but they won’t be able to file as married on their state return. 

To remedy this discrepancy, the Colorado Legislature could choose to “couple” or simply follow the federal regulations for same sex couple, as they do with most income tax changes. Then married, same-sex couples in the state will be able to file as they do at the federal level.  This would be the simplest and most convenient way for Colorado taxpayers to compete their returns, especially since the Colorado income tax form begins with federal taxable income. 

With the DOMA decision, the IRS “celebration state” announcement and the  increasing number of states allowing same-sex marriage, same-sex families made a huge leap forward in 2013.  However, state tax laws, like Colorado’s, are lagging behind.  With the passage of civil unions and the increasing support for same-sex marriage, Colorado has been moving towards equality for all families. It is time that we update our tax laws to reflect this progress. 

We would like to dedicate this blog to Mike Brewer and congratulate him on his October 29th marriage!

By Chris Stiffler

As mail-in ballots are set to go out this week, Colorado voters face a decision on a slight increase in their personal income taxes to generate much-needed resources to help Colorado’s schools prepare our kids to compete in the 21^st century global economy. What many people might not realize is that not all of the $950 million resulting from approval of Amendment 66 would come out of the wallets of Coloradans.  Around $200 million will come from a reduction in taxes owed to the federal government.  

Here’s why.

Because what we pay in personal income taxes to Colorado is deductible from federal income taxes for those who itemize their tax returns, what you would pay in additional taxes for Colorado schools under Amendment 66 could lower the amount of taxes owed to the federal government.  So, every five dollars raised by Amendment 66 produces a one-dollar cut in federal taxes owed by Colorado residents.  This essentially gives Colorado’s schools a $950 million dollar injection at 21% off. 

The deductibility issue is further explained in an analysis of Amendment 66 prepared by the Institute on Taxation and Economic Policy, a non-partisan, nonprofit organization in Washington DC, and can be found here.  In addition to the data about reducing federal taxes owed, the ITEP report also shows how Amendment 66 makes overall Colorado’s taxes fairer for everyone. 

Today, Colorado’s highest earners pay a much smaller share of their income in state and local taxes (4.6 percent) than the state’s lowest earners (8.9 percent). This is due primarily to Colorado’s sales tax, which tends to hit low-income families hardest because those families must spend most or all of what they earn on items subject to tax just to get by.

ITEP explains that most states partially make up for the lopsided impact of the sales tax with a personal income tax that has higher rates on higher levels of income. But Colorado’s personal income tax has just one rate (4.63 percent) for everyone, making it less effective than other states in equalizing the impact of state taxes.  The two-step tax structure proposed by Amendment 66 will help even out this imbalance – and boost Colorado’s future economic prospects. 

See the info-graphic about A66 making Colorado’s tax system more fair here. 

See how A66 reduces the taxes owed to the federal government with this info-graphic.

The federal government shutdown is no game in Colorado. Last time we checked, Colorado was home to some 53,000 federal workers, from park rangers to scientists to prison guards, who collectively earn about $1 billion in wages every three months. Having the bulk of them sitting at home, uncertain of their jobs or their income, is bad for the economy.

But it’s hard to tell exactly how bad because the places we usually turn for economic data are closed, thanks to the shutdown.

Yep, that’s right. Want the most recent information on federal workers from the U.S. Census Bureau? Too bad, it’s closed until further notice. Want the monthly jobs report from the U.S. Department of Labor to see if our economic ship is sailing true or listing?  Sorry, not this month. Want to know from the Bureau of Economic Analysis how consumers and investors are responding to the shutdown? Maybe later, it’s closed due to Congressional failure.

There are a lot of personal stories about the economic harm caused by the shutdown, and at least for now that’s what we’ll have to go on. But relying on anecdotes to describe the economy or make informed decisions is like playing pin the tail on the donkey – a lot of stumbling around groping blindly for the target.

The federal government does a lot of important things, but one of the most important is providing the data and information that allow us to know who we are collectively, what we’re doing as a country and how we can do better. Congress needs to stop with the games and let federal agencies, federal employees and our economy get back to work.

While a government shut down will harm all Coloradans, it would hit low-income children and families the hardest. That’s because many services that help support poor children and families are funded in large part by the federal government. If Congress can’t reach agreement to continue funding the federal government, low-income people who rely on these programs – including many who are kids – could have the rug pulled out from under them.

Temporary Assistance for Needy Families (TANF) provides cash assistance and other forms of support to the very lowest income people with children in Colorado, including job training, transportation assistance, childcare and other critical services. While TANF is funded through block grants to the states and would typically not be immediately affected by a government shutdown, TANF’s current funding runs out September 30, 2013. If Congress does not pass funding for the program either alone or as part of a larger bill to continue funding the government – often referred to as a continuing resolution – the program will not be able to provide this vital help to thousands of low-income Coloradans.

The federal government foots 100 percent of the bill for the Supplemental Nutrition Assistance Program (SNAP), also known as food stamps. Funding for SNAP, which helps a half a million poor Coloradans get enough to eat, ends on September 30, 2013. Without action from Congress, the federal government won’t be able to issue new SNAP benefits or reimburse states for administrative costs.

And, child nutrition programs, such as school lunch, school breakfast, special milk, and child and adult care food programs, do not receive funding in advance so states must typically submit reimbursement claims to the federal government. Nearly 390,000 Colorado children rely on school lunch for healthy meals. If Congress does not do its job, there will be no way for the federal government to reimburse states for these in-school programs that help make sure kids can concentrate on learning rather than their empty bellies.

Congress needs to stop playing this dangerous game of chicken and get to work. It’s not child’s play; it’s playing with children’s lives. 

SOLD OUT!

September 27th , 2013-  Thursday’s sneak preview of Inequality for All is sold out, the film opens in Denver at the Mayan on Friday October 4th, so there is still a chance to see it!  Check out there Facebook page for more details –  INEQUALITY FOR ALL 

You’re invited to join us for a sneak peek screening of Robert Reich’s new film INEQUALITY FOR ALL on Thursday October 3rd . CFI is partnering with Colorado Common Cause and ProgressNow Colorado to get a first look at this film exploring the causes and consequences of the widening income gap in America and asks what it means for the future of our economy and our nation. 

The movie opens in Denver on October 4th at the Mayan Theater – but as one of our supporters, we are inviting you to a special screening for non-profit groups on Thursday, October 3rd, at 7:30pm. Space is limited so get your tickets TODAY. Follow this link for the special discounted ticket price of $8.00.

The film premiered at the Sundance Film Festival this year, The film features noted economic policy expert, former Secretary of Labor and UC Berkeley Professor Robert Reich, tackling the subject of widening income inequality, and asks what effects this increasing gap has on society, our economy, and our democracy. Check out the trailer here.

We invite you to join us afterwards at The Hornet where we will have Colorado Fiscal Institutes Executive Director Carol Hedges lead a discussion  on how the themes Reich explores in the film impacts Coloradans.

Remember to get your tickets today! 

We hope you can join us, together we can continue the fight for economic equality in this country.

By Marlana Wallace

Colorado’s tax revenue is expected to grow at a slower pace in the fiscal year 2013-14, after increasing faster than anticipated during fiscal year 2012-2013, according to Focus Colorado: Economic and Revenue Forecast by the Colorado Legislative Council staff.  Even so, revenue is soon likely to grow fast enough to trigger TABOR rebates and certain tax credits, ultimately reducing the resources Colorado has for investments in schools, roads, and other public services vital to a strong economy.

The September revenue forecast gives Coloradans information on fiscal year 2012-13 (which just concluded in June), FY2013-14 (which covers the current budget) and FY2014-15 (which encompasses the budget lawmakers will debate during the upcoming legislative session). It’s key points include:

• FY2012 -13 ended with a $1.1 billion surplus. That money will be transferred to the State Education Fund, which is dedicated to K-12 school spending.
• Much of that $1.1 billion was one-time money, resulting from income tax changes at the federal level.  The boost will not provide the long-term stable funding that Colorado’s schools need to meet their growing challenges.
• General Fund revenue – which primarily consists of income and sales taxes used to fund core services like education, health care and corrections — grew by 10.6 percent in FY2012-13.  In coming years, General Fund revenue is expected to grow more slowly, likely increasing by 6.5 percent in FY2013-14 and 6.8 percent in FY2014-15.
• Revenue estimates for FY2013-14 and FY2014-15 were revised upward from the amount forecast in June, by $209.5 million and $244.7 million, respectively.
• The General Assembly will likely have just under $1.6 billion, or 18.5 percent, more to spend in FY2014-15 than the amount budgeted for FY 2013-14. 
• As the Colorado economy continues to recover, some important transfers of General Fund dollars may be triggered in the next few years under the state’s complex budget laws.

Once General Revenue increases by 6 percent, a number of temporarily suspended tax credits will go into effect, thereby reducing revenue.  These tax credits include: the instream flow income tax credit, the sales and use tax exemption for clean rooms, the child care contribution income tax credit, the historic property preservation income tax credit, and the clean technology medical device sales tax refund.

Colorado is also moving closer to experiencing sufficient revenue growth to trigger TABOR rebates to taxpayers. Once revenue growth exceeds a limit called the “Referendum C Cap,” TABOR rebates will be issued, when fully funded.  Revenue subject to TABOR is expected to be $154 million, $52 million, and $43 million below the Referendum C Cap in FYs 2013-14, 2014-15, and 2015-16, respectively.  Colorado has not had TABOR rebates since 2001.  

By Ali Mickelson

With such a high number of Americans living in poverty, the tax code is a key anti-poverty tool that Colorado lawmakers can put to good use.  A recent report by the Institute of Taxation and Economic Policy (ITEP), a non-partisan research group, discusses different ways that states are using their tax system to combat poverty. 

Some of the key steps recommended by ITEP include creating a state-level Earned Income Tax Credit (EITC) and Child Tax Credit (CTC), which help working families make ends meet;  providing property tax rebates to low-income homeowners and renters; and creating tax credits that help relieve the disproportionate impact of sales and property taxes on low-income households. 

Colorado’s triggered reinstatement of the EITC and CTC is recognized in the report as a move forward in state anti-poverty tax policy.    However, opportunities still remain.  Colorado needs to make the EITC and CTC permanent and fully fund them for the long-term.  The state should also look at creating low-income housing incentives and additional credits targeted at low-income families. 

For the full report and more information on anti-poverty tax policies, please click here.  

African-Americans, Native American Indians and Latinos in Colorado experienced higher rates of poverty and lower household income compared to Whites and Asians, according to new American Community Survey data released today by the U.S. Census Bureau. Take a look at our new fact sheet on disparities in Colorado. 

Disparities in Poverty and Income by Race

On the day the U.S. House of Representatives is scheduled to debate drastic cuts to the Supplemental Nutrition Assistance Program(SNAP), HR 3102, hundreds of thousands of struggling Coloradans are still living in poverty and need food assistance to survive, according to new U.S. Census Bureau data released today.

In 2012 there were 694,842 Coloradans – or 13.7 percent – living in poverty, the Census report shows. Tragically, over 18 percent of Colorado’s children were living in poverty last year, much higher than at the start of the recession in 2007, when it was 15.9 percent.

Check out our newest fact sheet on Colorado’s poverty and child poverty rates, SNAP families by Congressional district. Call your Representative today and tell them to oppose HR 3102. Capitol Switchboard: 202-224-3121

2013-9-19_Census SNAP

By Marlana Wallace

Investing in education will not only improve student outcomes—it will actually spur economic growth in Colorado, shows our latest report.

The evidence is impressive:

• States with a well-educated workforce have a high median wage and a high level of economic productivity. 

• Students learn better in small classes and go on to earn higher incomes as adults than their peers who were in more crowded classrooms as students.

• Children who go to full-day kindergarten outperform those in half-day kindergarten. Full-day kindergarten also plays a key role in narrowing the gap in learning and achievement between students from low-income families and those from better-off households.

• Full-day kindergarten increases the number of mothers who have full-time employment. It allows parents to enter the workforce a year sooner after a child’s birth and save a year’s worth of child-care expenses.

• Adults from low-income families who had early childhood education had higher earnings and were more likely to have graduated from high school and to hold a job. One study found that for every $1 invested in early education, as much as $13 was returned to society in the form of crime savings, increased revenue from taxes on higher earnings, and education savings over the long term.

• Children living in poverty who go through the Colorado Preschool Program consistently outperform children living in poverty who did not attend preschool in reading, writing and math, setting them on a course for better grades and higher-paying careers later in life.

The demand for well-educated, highly skilled workers is growing. More than ever, businesses are attracted to states where education is valued, schools are well funded and young people are prepared to join the workforce when they graduate from high school, technical school or college.  Better jobs and better pay are the result.

Yet, despite the proven economic benefits of investing in education, Colorado spends less than most states on its public schools.  

Amendment 66 will start to reverse that.  If voters approve Amendment 66, Colorado will be able to enroll thousands more children in preschool, make full-day kindergarten available to all Colorado children, and increase funding for our schools, allowing for smaller class sizes.  These targeted investments will boost the performance of thousands of children across the state, especially the most disadvantaged. These gains in the classroom will translate into better jobs and better earnings later in life, helping to strengthen Colorado’s economy.

In November, Colorado voters will have the opportunity to dramatically increase our commitment to Colorado students, and in doing so lay the groundwork for a brighter economic future for students, their families and the state as a whole.  

CFI urges Coloradans to follow the evidence: support our students, support our parents, support our teachers, support our businesses, and support our economy –Vote yes on 66.

To read the full report, Investing in Education Will Boost Colorado’s Economy, click here! 

This report is one of three issue briefs outlining the economic benefits of Amendment 66, jointly written by the Colorado Fiscal Institute, the Colorado Center on Law and Policy and the Bell Action Network.