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Immigrants Power Colorado’s Economy

Immigrants are an essential workforce for industries across Colorado’s economy. However, immigrants face a variety of barriers that impede economic mobility and prosperity. 

Immigrants make up 10% of Colorado’s population and drive over 10% of our state’s economic output. Immigrants are essential to our communities and local economies. Thirteen percent of physicians in Colorado are immigrants, and 28% of construction workers in Colorado are immigrants. Immigrants play a crucial role in not only building homes and providing healthcare, but are also integral to Colorado’s service and transportation economies.

This infographic begins to illustrate immigrants’ impacts on our communities.

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Timeline of Resistance and Community Movements

In Colorado, we have witnessed a dynamic history of triumphs and challenges in immigration policies. Despite its conservative roots and a surge in anti-immigration sentiment fueled by local politics, our state has significantly changed laws and procedures to make Colorado a safer and more inclusive place.

Thanks to the dedicated efforts of community members, advocacy leaders, political figures, and research organizations, Colorado is now leading the way in creating a welcoming environment for our immigrant community to thrive.

This timeline highlights critical milestones that have revolutionized how Colorado immigrants are welcomed and integrated into our communities. We hope this tool showcases the remarkable progress achieved and inspires the implementation of more inclusive policies in the years to come.

The Colorado Fiscal Institute supports Proposition HH and its benefits to Colorado homeowners and renters.

Colorado leaders are responding to the needs of their constituents with property tax relief through Proposition HH. This is a responsible way to provide property tax relief without harming our schools and communities. With property tax savings and TABOR rebates, Proposition HH has the potential to drastically impact the economic health and well-being of your local community. 

Through Prop HH, Colorado families are set to receive over $5,000 in property tax savings and up to $10,000 in TABOR Rebates

Prop HH will have an immediate positive impact on all Coloradans’ pocketbooks, without harming schools and communities. Property tax increases have been a significant burden on Colorado families in recent years, with bills growing by an average of 40% during the past two years. Prop HH is a tool to help struggling Colorado families and individuals dealing with historic inflation. Prop HH aims to responsibly remedy the issue by providing property tax relief, while preserving funding for essential local government services, like our schools and fire protection. 

Proposition HH allows Colorado’s current revenue cap, put in place 30 years ago by TABOR, to grow by an extra 1%, and allows the state to use more of the revenue to it collects to provide relief to local governments, schools, and communities without increasing tax rates. With the proposed new revenue cap under HH, taxpayers can still expect between $300 and $1,300 in TABOR rebates each year, depending on their income. The money they don’t receive in rebates will go to schools, fire protection, and other local services to make up for reduced property taxes. This will result in more than a billion dollars going to schools per year in the future.

If Proposition HH passes, the average homeowner in Colorado will see $1,340 in property tax savings over the next three years while still receiving a projected $2,482 in TABOR refunds. Netting the property tax savings with expected reductions to state refunds over the decade, Proposition HH will result in $2,682 in net savings. That’s more money in taxpayers’ pockets.

How Will Proposition HH Benefit Taxpayers During a Recession?

In our recent report, CFI modeled two ten-year scenarios to gauge the net benefit of HH, including the foregone TABOR rebates and property tax savings. One model factors in a recession, while the other assumes no recession. 

Assuming average historical growth rates with a recession, the average taxpayer in the average valued home in Colorado would save $4,460 over the decade from Proposition HH. Colorado families can use these significant savings to improve their lives and contribute to their communities.

Act Now: Support Proposition HH 

 

Proposition HH benefits Colorado families and communities by providing considerable property tax savings and TABOR rebates. A vote in support of Proposition HH, is a vote in support of preserving critical public services and the economic health of our communities by offering homeowners and renters extra resources and the opportunity to keep more money in their pockets.

 

This November, vote for Prop HH. 

Together, we can build a strong future for Colorado and promote our communities’ economic health and well-being.

1. Resilient but slowing economy

The economy is beating expectations for the first half of 2023, but it’s not growing as fast as it was in 2022. GDP is expected to slow in 2023 and 2024 as tighter monetary policy — to fight inflation — dampens demand. It seems the Federal Reserve (the Fed) has wrangled inflation without a recession, but still there are some weaker pockets in sectors that are impacted by those interest rate hikes. There was a slight uptick in Colorado’s unemployment rate in August to 3.1%. Personal income was 5.8% higher than the year earlier. Wages and salaries are up 5.7%. This is healthy growth, but not as strong as 2022. Employment gains are slowing and nominal wage growth is slowing.

 

 

 

 

 

 

2. Very Little New Money for Next Year’s Budget

We finished last year’s budget with a 17.6% reserve. This year’s budget looks right on the money with the revenue coming in compared to the appropriations for a 15.01% reserve—just $1.5 million above the 15% statutorily required level. But next year’s budget looks like it will have very little extra money. Next year’s budget is expected to have $1.2 billion more than this year’s appropriations, but once you cover caseload growth, inflation, reserve requirements, capital construction, and controlled maintenance (which basically keep the state even) there’s only $23 million in new money. 

 

 

 

 

 

 

3. TABOR Rebates Still Expected Through Forecast

TABOR rebates will be $3.57 billion in FY 2022-23—that amounts to between $586 and $1,834 per tax filer. That could change if HH passes, however, where everyone would get $898 in an identical TABOR rebate. TABOR rebates are projected to be $1.7 billion in FY 2024-25, $1.77 billion in FY 2025-26, and $2.28 billion in FY 2025-26. Under current law, that means that tax filers will receive between $250-$850 depending on their income for the next several years. Much of those historically large TABOR rebates comes from historically high corporate income taxes. The pre-pandemic corporate income tax peak was $920 million. Colorado collected $2.37 billion last fiscal year and is expecting $1.88 billion this year. Corporate profits are up across the nation. 

 

 

 

 

 

 

 

 

4. Housing and Energy Prices Eating into Wages

The inflation rate in Colorado was 4.7% in July (year over year). That’s still above the target rate of 2% and above the national inflation rate. Gas prices and housing costs are driving inflation, yet we expect headline inflation to decline throughout the forecast period — though not to the 2% target. Housing makes up the largest component of the inflation metric. The shift to remote work has created a higher floor for housing prices. Households are responding to inflation by spending down savings as illustrated by the personal savings rate below the historical average of 7.5%.

 

 

 

 

 

 

5. Budgeting to the TABOR Cap Doesn’t Keep Us Even

State revenue, which is restricted by TABOR to only grow by inflation plus population, is composed of taxes and cash fund revenue. When cash funds (like severance tax revenue or transportation revenue) grow faster than anticipated, it squeezes money available in the General Fund because TABOR rebates are paid from the General Fund. In addition, the costs for the government will continue to rise faster than the consumer price index — the measure used to grow the TABOR cap. Prices on things the government buys tend to grow faster than on things the average consumer buys. By restricting the government to only grow by a consumer measure of inflation, the state loses in real terms: next year’s budget will have basically no money for new community investments. 

 

 

 

 

 

 

 

 

The post-pandemic labor market, which forced employers to step up their game to attract workers, won’t last forever. What goes up may very well come back down. The time to lock down gains for low wage workers is now. Policies like local minimum wage boosts, better wage theft enforcement regimes, and strong worker protections can ensure that rising inflation won’t push us back into the status quo: a labor market stacked in favor of big corporations and against the interest of Colorado’s working families.

1. Low-wage workers have seen real wage gains.

An upcoming CFI report finds that Colorado workers earning low wages, especially younger and non-college educated workers, have indeed seen substantial real wage gains – even during a time of historic inflation. The wages of the bottom are up 30 percent in real terms since 2012, with most of that growth in the last 5 years. These gains are a step in the right direction, but there’s still work to be done.

2. Workers’ gains are largely the result of temporary policy.

Many of the wins over the last 3 years for workers came from the extra leverage they received as a result of fiscal stimulus, child tax credits, bulked-up unemployment insurance, and protection from evictions. Many of these policies were one-time large federal spending bills, meaning things like the expanded federal Child Tax Credit – which gave working families cash in hand to stay afloat – have come and gone.

While prominent national labor economist, Arindrajit Dube contends “there are good reasons to think that at least a chunk of the changes that we’ve seen in the low-wage labor market will prove lasting,” he also raises that workers may lose this post-pandemic leverage if companies start cutting jobs. 

And in Colorado, this may very well be a salient threat; job growth is on a slowing trajectory. Further, anti-competitive tactics threaten to erase gains for workers and harm consumers, meaning a swift end to these meager gains. Strong labor standards, such as a higher minimum wage and robust enforcement of existing laws, can prevent workers from facing economic hardship when the labor market inevitably weakens.

3. Corporate greed: from big gig to big grocery.

The elusive ~$25 billion Kroger-Albertsons merger not only poses a distinct threat to the ability of over 85 million households to afford their groceries, but the proposed consolidation is also estimated to produce mass layoffs, harm Colorado’s farmers and ranchers, and suppress already-low wages for grocery store workers. 

In a major loss for Southwest Airlines employees and worker justice advocates, the company reached a settlement with the state over the summer allowing the company to avoid 90 percent of what would’ve been the largest fine ever issued by the state of Colorado for labor law violations. Advocates worry this is indicative of how the state will handle future labor violations.

CFI has highlighted the true economic costs of allowing exploitative ride-share and delivery corporations to hide behind their algorithms and claims of flexible work. Not only do workers earn sub-minimum wage, but “big gig” companies are able to skirt transparency or accountability to exploit riders and drivers alike.

 

4. The guiding light: new worker protections are coming into effect.

A major bright side: updates to workers’ rights policy in Colorado are coming into effect. One of these is the Protecting Opportunities and Workers’ Rights Act, which will improve the standard for workplace harassment to move the needle towards securing true dignity and safety for all workers across the state. Hot labor summer also brought the expansion of our state’s paid sick leave law, and free speech protections for public employees who speak out for better working conditions. 

Another promising development at the city level: new laws in Denver should help ensure stolen and underpaid labor is a thing of the past. Denver Labor recovered more than $1 million for underpaid workers, which already exceeded previous annual records, and in the first half of 2023 (as of August 4th, 2023), $1,479,453 in stolen wages has already been recovered for employees across Denver. Other localities might see fit to follow suit. 

Localities across the state are noodling with minimum wage boosts, and Denver’s promising results indicate that generous, scheduled increases yield strong economic benefits. CFI’s recent blog highlighted three metrics in which Denver’s economy outpaced the rest of the state since raising the minimum wage.

So now what? 

Locking down these hard-earned gains for low wage workers will require intentional policy choices, and a continued movement towards ensuring a voice at the table for working people. When the working people who keep our economy in motion suffer, the state’s economy pays the price.

 

Called to Action?

Minimum Wage:

If you live in Boulder County, email your elected officials to express your support for raising the wage:

https://bit.ly/BoulderCountyLivingWage

Sign the petition to demand $25 an hour by 2028:

https://actionnetwork.org/petitions/boulderminimumwage/

Stop the merger:

Have we convinced you the Kroger-Albertsons merger is bad news for consumers, workers, and economic competitiveness alike? Let the Federal Trade Commission know here:

https://actionnetwork.org/letters/tell-the-federal-trade-commission-stop-the-kroger-albertsons-mega-merger-now?source=NoGroceryMerger.org

If Colorado is to shift away from oil and gas production, we will need to fill that economic hole with an industry equally or almost equally productive. Colorado is well known for its excellent skiing, mountain climbing, biking, fishing, rafting, and camping. We beg the question: just how big is the Outdoor Recreation industry? 

Colorado’s Outdoor Recreation industry accounted for 125,244 jobs in 2021.  That’s 4.3% of total employment, putting Colorado 8th in the country for Outdoor Recreation jobs as a portion of total employment.

Colorado is above average with 2.7 percent of GDP coming from the Outdoor Recreation industry. The Outdoor Recreation industry generates $11.6 billion of the state’s GDP.  In 2021, wages and salaries paid to outdoor recreation workers in Colorado totaled $6.1 billion.

The outdoor recreation industry accounts for more than 6 times as many jobs as the oil and gas industry in Colorado.  In 2021, 125,244 people worked in the outdoor sector compared to 19,871 jobs in the oil and gas sector.

	Jobs 2021	Annual Wages 2021	GDP (thousands) 2021
Oil and Gas	19,871	$2,690,114,464	$14,118,900
Outdoor Recreation	125,244	$6,143,496,000	$11,632,200
Source: U.S. Bureau of Economic Analysis, Quarterly Census of Employment and Wages

Boating/Fishing is the nation’s largest conventional activity in Outdoor Recreation. In Colorado, however, “snow activities” is by far the largest. In the entire country, GPD related to snow activities is $5.2 billion.  Colorado generates $1.27 billion. Ultimately, one quarter of the nation’s snow activities economy comes from Colorado.

	Snow Activity GDP (thousands)
Colorado	$ 1,267,667
Utah	$   519,352
California	$   505,666
Washington	$   261,261
Texas	$   218,259

Small towns in Colorado depend upon Outdoor Recreation Tourism. 

To scientifically investigate the impact that the outdoor industry has on the economic vitality of towns in Colorado, we would need an experiment group — in which outdoor tourism was present — and a control group — in which it wasn’t.  Three unique scenarios have provided us with such a case: the COVID pandemic, extreme wildfires, and liability issues that temporarily closed a popular hiking destination.  

We focus on three natural experiments: the COVID pandemic and the accompanying locks downs; the town of Alma, which lost tourists because a popular hiking spot in the area was closed in 2021; and the 2018 forest fires (specifically the Spring Creek Fire and the 416 Fire), which drove away tourism from the towns of La Veta and Silverton.    

Using these three natural experiments, we look at the sales tax data in towns to see what happens when they suddenly lose their outdoor tourism industry. 

What happened to Alma’s sales tax revenue when popular Fourteeners were closed for liability purposes? Using the hiker count data from Colorado Fourteeners Initiative, hikers dropped from 25,000 in 2020 to 10,000 hikers in 2021.  With the drop in hikers came a 19% drop in sales tax revenue during peak hiking season in 2021.

What happens when outdoor recreation isn’t possible because of a wildfire?  In southern Colorado near La Veta Pass, the Spring Creek Fire started in late June 2018 and would eventually burn more than 100,000 acres before it was 100 percent contained in early September. La Veta saw an 18 percent drop in retail sales during the fire compared to the year prior. During the 416 Fire The Durango & Silverton Narrow Gauge Railroad alone canceled 31,000 reservations for that June. The town of Silverton saw a 16 percent drop in retail sales during the fire. 

In many ways, the oil and gas industry and the outdoor recreation industry are similar in Colorado. In both industries, Colorado is in the top ten ranking — 8th in the employment share from outdoor recreation and 9th in share of the economy dependent upon oil and gas. Towns across Colorado are particularly dependent upon each industry.  

The difference between these two industries is outdoor recreation industry doesn’t require the cleanup and plugging of abandoned wells, nor does it create negative externalities like air pollution or lower property values, which occurs to property near oil and gas drilling sites. In addition, the outdoor recreation industry doesn’t contribute to climate change and the increasing severity of forest fires like the fossil fuel industry does. A 2023 study found that 37% of the area burned by forest fires in the western U.S. and southwest Canada since 1986 can be attributed to heat-trapping emissions from the world’s largest fossil fuel producers. Colorado has seen a huge increase in the size and damage of wildfires in recent years. The top 20 largest forest fires in Colorado’s history have all occurred since 2000.  With Colorado comprising 25% of the country’s snow activity economy, issues of climate change and reduced snowpack disproportionately impact the state.

Recent climate goals set by Congress and our own General Assembly addressing the harmful impacts the oil and gas industry has on our health, economy, and climate mean Colorado will begin to transition away from the industry. The Outdoor Recreation economy is significant in Colorado and provides an alternative, though not full replacement, for the extractive oil and gas industry. Bolstering the Outdoor Recreation industry through economic development, tax, and employment incentives can help ease the pain of shifting away from oil and gas, and towards a more environmentally sustainable economy.

Tuesday, August 1st marks Colorado’s 147th birthday! From our Rocky Mountains, triumphant sports teams, 300 days of sunshine, and uniquely connected communities, Colorado is beloved by those of us who call it home. 

Though it may be a bit nerdy, we at Colorado Fiscal Institute never miss a chance to explain how many of the things that make our state so worthy of celebration depend on our tax code. This includes a robust network of cultural, outdoor, and educational programming supported by our state and local governments. Here are five ways to celebrate Colorado Day this year, all funded by taxpayers across the state.

1. Check out a book from your local public library.

Public libraries in Colorado are funded primarily by local governments, meaning their funding is an appropriation of city or county property and sales tax revenue. They also received state funding in 2022 and 2023 thanks to the Colorado Library Law, which appropriated at least $4,500 each to 97% of libraries across Colorado. 

The Denver Post names 10 books by Colorado authors you can check out today!

2. Take a boat out on a local lake or reservoir.

Colorado has more than 4,000 lakes and reservoirs. Not all of them are safe or legal to boat or swim in, so make sure to do your research before showing up with a swimsuit and floaties. 

The Colorado tax code helps preserve the native ecosystems of our reservoirs and lakes by funding the Aquatic Nuisance Species Program (ANSP), which checks boats at lakes and reservoirs to ensure they do not spread ecosystem-threatening, potentially non-native species between bodies of water. Oil and natural gas producers pay severance taxes in Colorado, which are used to pay for the ANSP, other mitigation efforts, and the preservation of our natural resources, outdoor spaces, and ecosystems. Colorado Parks and Wildlife receives funding from severance taxes, as well as other increasingly important departments responsible for programs such as fire mitigation and species conservation.

Although, severance tax revenue is inherently volatile and can change from year to year due to global resource prices. Diversifying our tax base in counties that are highly dependent on severance tax revenue would ensure Coloradans are able to enjoy our outdoor spaces for years to come.

3. Visit the Denver Museum of Nature and Science.

One major source of public funding for many nonprofit educational organizations in the Denver metro area is the Science and Cultural Facilities District (SCFD). The SCFD is made up of Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas and Jefferson counties. Via the SCFD, 1 cent of every $10 in sales and use taxes (0.10%) is used to fund culturally-enriching programs, supporting over 300 organizations, including the Denver Museum of Nature and Science.

The SCFD was created by the Colorado legislature in the 1980s, and it serves as one example of our elected officials leveraging the tax code to further the economic and intellectual interests of Colorado taxpayers. In 2016 voters opted to renew the SCFD until at least 2030. For Colorado Day, CFI celebrates this use of public funds to preserve our access to various forms of knowledge and culture, a widespread value in Colorado.

Other beneficiaries of the SCFD fund include the Denver Center for the Performing Arts, Denver Art Museum, and Denver Botanic Gardens. Thanks to the SCFD, many membership organizations are also able to provide free days throughout the year. Click here for the SCFD free day calendar!

4. Walk the Pikes Peak Greenway in Colorado Springs.

The Colorado Springs TOPS sales and use tax is similar to the Science and Cultural Facilities District. Every 0.10% of sales and use taxes is used to fund the maintenance and preservation of open spaces and trails in the Colorado Springs area. Colorado Springs voters recently opted to renew the tax for the next 20 years. The program is administered by the Parks, Recreation, and Cultural Services Department. 

Thanks to TOPS, residents and visitors can walk the 16-mile Pikes Peak Greenway, which connects with various other popular and beautiful trails across Colorado Springs. A favorite of local students and dirt bikers, the Red Rocks Canyon Open Space in Colorado Springs was also purchased with money raised by the TOPS tax.

5. Go all-out for Colorado at the Colorado State Fair. (August 25th – September 4th)

The Colorado State Fair is held annually at our state fairgrounds in Pueblo. This year, the fair will feature such acts as the popular country band Lady A, comedian Gabriel Iglesias, and Pat Benatar & Neil Giraldo. The Colorado State Fair also features four days of rodeos. 

Each year, money is transferred from the Colorado General Fund (where statewide income and sales tax revenue goes) to the Department of Agriculture for use by the State Fair.  The Fair boosts Pueblo’s local economy and provides a hub for community, connecting Coloradans from across the state. In 2021, the Fair launched their master plan to modernize their facilities, expand their attractions, and make the Fair even more accessible to Colorado’s diverse populations.

Tax revenue preserves and expands the things we love.

From Denver metro, to the Western Slope, to the Eastern Plains, taxpayers across our state are responsible for much of the preservation of our cherished culture of recreation, play, and learning. At CFI, we’re celebrating Colorado’s 147th birthday by taking stock of all the things we know and love about our state, and with a deep appreciation for the taxpayers who ensure those things live on.

The Colorado Department of Labor and Employment (CDLE)’s new report tracking economic data disputes common claims made by opponents of minimum wage increases that they lead to economic stagnation and growth in unemployment. In the three years following an implementation of its own, higher minimum wage, Denver outpaced the rest of the state in jobs, wage growth, and sales tax revenues, indicating that local minimum wages can be a useful policy tool for localities to advance shared economic prosperity. 

For 20 years, Colorado had a law on the books that prevented cities in the state from enacting minimum wages above the state’s level.  In 2019, House Bill 19-1210 gave local governments in Colorado back the authority to establish a local minimum wage above the state’s minimum wage. As part of that 2019 bill, the Colorado Department of Labor and Employment (CDLE) is required to write a report regarding local minimum wage laws in Colorado, including economic data on jobs, earnings, and sales tax revenue in the locality with a higher minimum wage compared to neighboring jurisdictions, which don’t.  

Since 2019, two local governments have enacted a local minimum wage above the state minimum: the City and County of Denver (in 2019) and Edgewater (in 2023).   

In May of this year, the Edgewater City Council approved Ordinance 2023-07, which raised the minimum wage to $15.02 for workers in 2024 and is set to ramp up as it nears Denver’s minimum wage in the out years. When Denver’s minimum wage was raised, the initial CDLE report had to rely on limited data that was also impacted by the pandemic.   

Now that Edgewater recently passed a minimum wage ordinance, CDLE was mandated to update that report. This updated version will provide a first look at Denver’s minimum wage impact, since it includes more years of data than the initial report, and will be a useful guide for other jurisdictions looking to establish their own local minimum wage.  

Denver’s minimum wage schedule went from $12.85 in 2020, to $14.77 in 2021, to $15.87 in 2022, and to $17.29 in 2023 (compared to the state minimum wage of $13.65).

Denver raising its minimum wage creates a natural experiment to compare other parts of Colorado that have kept the state’s minimum wage. CDLE’s analysis takes neighboring cities and comparable localities as the baseline, and then compares what happened to unemployment rates, weekly earnings, and sales tax collections between Denver and the rest of the state. 

Opponents of local minimum wage policies claim that such laws cause businesses to cut jobs, cut hours, and pass the higher costs to consumers in higher prices, which can result in fewer purchases. If those claims are true, we’d likely see a drop in jobs, a drop in hourly earnings, and a drop in sales tax revenue collections in Denver, which increased its minimum wage, compared to other jurisdictions, which haven’t.   

So, what happened? It turns out that Denver did better all in 3 categories compared to the rest of the state. Unemployment was lower, weekly earnings increased, and sales tax collections all outpaced the rest of Colorado. The opposite of what opponents of minimum wage said would happen, happened. 

With a higher minimum wage, Denver’s unemployment rate was better than the rest of the state. 

Denver’s unemployment was 5.45% in 2021 compared to 5.9% in the rest of Colorado. As the report states, “Overall, in both 2021 and 2022, as Denver’s minimum wage rose significantly, its unemployment rate dropped more than any comparator jurisdiction’s.” 

With a higher minimum wage, Denver’s average weekly wage growth outpaced the rest of Colorado.  

In 2020, 2021, and 2022, weekly wages in comparable jurisdictions across Colorado remained stagnant or fell, but in Denver weekly wages grew faster than the rest of the state: by $52.00 in 2020, by $49.67 in 2021, and by $24.67 in 2022. As CDLE notes, “Each of the first three years since its local minimum wage took effect (2020-2022), Denver maintained strong wage growth, and stronger wage growth than Colorado and comparator jurisdictions.” 

With a higher minimum wage, Denver’s sales tax collections grew more than the rest of the state and comparable jurisdictions.  

Between 2020 to 2022, Denver’s per capita sales tax revenues at restaurants and bars increased by 85%, which was double the sales tax increase in Colorado and comparable cities. The CDLE report explains, “These data show that per capita spending at Denver restaurants and bars has outpaced per capita spending at these establishments statewide throughout 2021 and 2022. Denver not only recovered from a greater reduction in spending in 2020 due to the impact of COVID-19, but experienced more spending—and more growth in spending—at restaurants and bars than comparable cities and counties and the state as a whole.” 

If we adjusted for cost of living across counties, what should the minimum wage be? 

The report also highlights the cost of living across counties in Colorado compared to the area’s minimum wage. The counties around Denver, and Colorado’s ski towns, are all in need of adjusting their minimum wage laws to keep up with their cost of living. For example, in 2021, the adjusted cost of living in Pitkin County (Aspen) would require a minimum wage of $16.04, almost four dollars higher than the statewide minimum wage of $12.32.  The map below shows the counties whose minimum wage is below the equivalent minimum wage once adjusted for cost of living.

Counties with high costs of living, including Denver metro counties and outdoor recreation destination counties, can use CDLE’s updated report as evidence to show that increasing local minimum wages does not have disastrous economic consequences; in fact, it has the opposite effect. Boosting income for the lowest-earning people can have rebounding effects for productivity, spending, and tax revenue, making those counties more equitable and prosperous places to live.  

 

By: Caroline Nutter and Ealasha Vaughner 

How the EITC and CTC support Colorado Parents

As we celebrate Parents’ Day this weekend, Colorado should reflect on how our policies can help or hurt families. This includes our tax code, where we have abundant opportunities to make parents’ lives even better.

Colorado parents are struggling. The COVID-19 pandemic highlighted this as an inescapable truth. Despite federal and state relief efforts, caregivers were laid off and household bills piled up. Families rationed necessities like diapers and formula in order to keep a roof over their heads. The percentage of parents lacking secure employment leapt from 26% to 29% nationally from 2019 to 2021. Parents who were fortunate enough to retain their jobs had to balance a full work-day with full-time childcare and virtual school duties. Between 2019 and 2021, the number of children in poverty increased by over 5,000, or almost 4%.

In 2023, three years after the pandemic began, working families are still trying to catch up in an economy that has not been built for them. The average cost of childcare in Colorado is $16,333, the fifth-highest in the nation. Infant care in Colorado costs more than in-state tuition in 34 states. Nationally, 13% of families had job changes between 2020 and 2021 due to childcare costs. Childcare expenses are especially burdensome to mothers, and mothers of color often feel the struggle most. Sixteen percent of families with single mothers had job changes due to childcare costs. 

Over the last 20 years, CFI, Clayton Early Learning Community Ambassadors, and countless other partners and organizations, advocated for changes in the tax code to provide targeted relief to parents and their kids through low-income tax credits. 

Two in particular, the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC), are critical safety net policies for parents. In 2018, the EITC lifted about 5.6 million people out of poverty, including about 3 million kids. In 2021, the Biden administration expanded the CTC to the lowest earners and expanded the credit amount under the American Rescue Plan Act (ARPA), cutting child poverty by 30%.

Colorado has its own EITC and CTC, both of which are modeled on the federal credits. During the 2023 tax season, families with children under the age of six who met the income requirements received a state-level CTC from Colorado for the first time, thanks to work done in the legislature in 2021. This year, the legislature passed a bill that will further expand the Colorado CTC, as well as increase the amount of the Colorado EITC. Families who qualify will see an increase in the EITC from 25% to 38% of the federal credit when they file their 2024 taxes, and the CTC to between $200 and $1,200 per child, depending on the income of the taxpayer. The changes made to the Colorado CTC in 2023 will also include or increase the benefit for 65,000 kids across the state that had previously been excluded, putting an additional $45 million into the hands of families earning the lowest incomes.

A Testament to the Impact of Tax Credits

EITC and CTC are crucial for strengthening families and community members in Colorado. These benefits not only encourage people to work but also boost their self-confidence, thereby leading to an increase in the economy. Additionally, they promote workforce participation and encourage low-wage workers to get additional education or training to improve their employability and earning potential.

As a single mother of two, I understand the challenges of keeping up with a monthly budget. Unfortunately, things do not always go as planned. Unforeseen circumstances tend to arise, such as my kids outgrowing their clothes and shoes, or unexpected car repairs. These are the obstacles working families face daily. That is why receiving tax credits like the EITC or CTC is a huge help for parents and families like mine. They can help us stay afloat, avoid debt, and even help reduce debt we already have.

The EITC and CTC effectively lower poverty rates, while aiding families who experience the Cliff Effect. The Cliff Effect refers to the unintended consequence of a pay raise resulting in a significant reduction of government assistance. Even a minor increase in income can cause some to lose access to subsidized benefits such as healthcare, housing, or childcare. This sudden loss can leave families worse off than they were before. These tax credits provide a lifeline for families like mine who are currently experiencing the Cliff Effect, or simply struggling to make ends meet. They enable us to purchase necessities, such as food and housing.

Studies have shown that utilizing certain tax credits can not only enhance a child’s immediate state of well-being, but also result in positive long-term effects, such as improved health and increased earnings during adulthood. As someone who has personally benefited from this, I can attest to its effectiveness. With my EITC and CTC, I was able to enroll my two daughters in extracurricular activities, thereby boosting their self-assurance, social skills, and knowledge in areas they might have otherwise missed due to financial barriers.

Getting an extra few hundred dollars from my EITC and CTC makes a significant difference for my family. These credits are essential for families to make ends meet. They improve economic security, enhance children’s educational performance and attainment, and promote better health outcomes. Moreover, they provide a short-term safety net to help families achieve sustainability.

The tax code can be a powerful tool for lifting struggling parents and their children out of poverty. Data and stories from parents continue to show the tremendous impact the EITC and CTC have on Colorado families. With the recent expansions of these credits during the 2023 legislative session, Colorado now has one of the most generous CTCs in the country, a true testament of the power of collective advocacy on proven tax policies. Colorado must continue to pass tax policies that uplift working families and our economy, ensure protection of these recent gains, and work to expand the EITC and CTC even further.

 

About the Authors:

Caroline Nutter is the Legislative Coordinator at the Colorado Fiscal Institute. Caroline researches and analyses state fiscal policy issues and advocates for policies that bring equity and prosperity to all Coloradans.

 

Ealasha Vaughner is the Manager of Policy and Advocacy at Clayton Early Learning. A Colorado mother of 2, Ealasha is a recipient and longtime advocate of targeted tax credits like the EITC and CTC. 

 

Via Tenor

#1: No New Money Projected for the Out-Year Budget

The out-year’s budget (FY2024-25, which starts July 2024) is projected to have an extra $1 billion within our revenue limit — but that’s before accounting for caseload growth, inflation, and other scheduled payments on the books.

Keeping up with inflation (i.e. more students and Medicaid enrollees) requires $372 million to stay even in real terms. Add reserve requirements, controlled maintenance, and inflation adjustments for state employee compensation, and that “extra” $1 billion is used up. In fact, after staying even in real terms, the state is projected to be $78 million short of its 15 percent reserve requirement, despite sending back almost $3.3 billion in TABOR rebates.

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#2: Inflation Slowing, but Still Elevated

After a very high 8.5 percent inflation rate last year, prices aren’t rising as fast this year. Colorado is looking at a 5 percent inflation rate through May 2023. Home prices and energy prices have dropped recently, contributing to the decreasing rates. For example, Denver’s home prices are down 6.1 percent from the peak last year. Still, 5 percent inflation is above where it has been in the last 15 years.

The slowing inflation rate is good news for the economic growth forecasts, as the Federal Reserve is expected to pause interest rate hikes. Wages are starting to catch up with inflation, too. After two years of aggregate wages being outpaced by inflation, it seems we may finally see positive real wage growth in 2023.

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#3: Corporate Income Taxes are Way Up

Corporate income taxes are up 145 percent between 2023 and 2019 — that’s double and a half above the pre-pandemic levels. Corporations seeing record profits means more tax collections for Colorado, but it doesn’t necessarily mean more revenue for schools and roads. Why? The extra $1.3 billion that corporations paid between the pre-pandemic levels and now just means more TABOR revenue will be sent back to taxpayers since we are over our revenue cap. Even with record corporate profits, we still won’t be able to pay down what the state owes to schools (Budget Stabilization Factor) while only budgeting to the current TABOR revenue cap.

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#4: TABOR Rebates Revised Upward For This Year

The state is projected to return $3.3 billion in TABOR revenue this year and $2 billion next year. Compared to the March forecast, TABOR revenue expectations were increased by $560 million in FY22-23. These are historically large TABOR rebate amounts. Before last year, when Colorado returned $3.7 billion, the largest TABOR rebate was less than $1 billion.

There are currently 3 rebate mechanisms in law that are used to refund surplus dollars above the revenue cap. About $3 billion will be returned via the six-tier sales tax rebate mechanism and $394 million will be used to fund the Senior Homestead Property Tax Exemption, along with some other property tax breaks from Senate Bill 22-238. The $3 billion returned via the six-tier mechanism means between $587 and $1,854 will be returned per tax filer depending on their income. The current way the six-tier mechanism is set up gives higher rebates to those with higher income. High-income taxpayers making over $279,000 annually could get as much as $3,000 more than the lowest-earning Coloradans, depending on filing status, at a time when many families are still struggling.

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#5: What does this mean for Prop HH, which voters decide on this November?

This year, Colorado voters will decide on Proposition HH, which gives property tax cuts by lowering assessment rates, backfills some local governments for the lost revenue of those property tax cuts, and allows the state to keep more TABOR revenue by growing the revenue cap by an extra 1 percent each year for 10 years.

A yes vote on HH would also change the six-tier rebate mechanism to an identical rebate for all tax filers for one year only. Instead of between $587 and $1,854 for tax filers depending on their income, this would give everyone $809. The effect of allowing the revenue cap to grew by an extra 1 percent is more pronounced several years from now, but it would mean an extra $166 million above the current cap this year.

Stay tuned for further Prop HH details from CFI this summer!

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The Rent is Too Damn High

On average across the state, a person must work 92 hours a week at minimum wage to afford a two bedroom apartment at the statewide average Fair Market Rent, which is about $1,500. For comparison, spending around $800 on rent is considered affordable for a Coloradan who earns 30% AMI––that’s almost half of the Fair Market Rent rate. Across Colorado, people on fixed incomes, working people, and their families struggle to afford to remain housed. Essential service workers, teachers, and nurses often cannot afford to live close to where they work. A single mother earning an average teacher’s salary in Colorado cannot afford to house and support her family without a second job.

The hourly wage needed to afford a two-bedroom apartment at Fair Market Rent and work a 40 hour week is $28.94, but the average hourly renter wage in Colorado is $23.55. A $1,225/month rent is considered affordable for someone earning around the state’s average renter wage of $23.55/hour, compared to the average Fair Market rent of $1,505/month for a two bedroom apartment. Affordability is defined as spending no more than 30% of a household’s income on housing costs. Colorado ranks eighth in the nation for most unaffordable housing costs, according to research from the National Low Income Housing Coalition.

Across Colorado Counties, the Cost of Housing Outpaces Wages

The affordable housing shortage is more severe for Coloradans with low incomes: for every 100 renter households, there are only 29 housing units available and affordable for Coloradans with extremely low incomes (at or below 30% local AMI). There is a shortage of over 114,000 affordable housing units for Coloradans within this income range and a deficit of more than 142,000 units for those with very low incomes (between 31-50% AMI), compared with a shortage of 27,000 for those with low incomes (between 51-80%). To restore the healthy balance between supply and demand in the housing market, Colorado’s State Demographer estimates that over 485,000 additional units must be added to the market by 2030.

Over 1 out of 3 Coloradans are renters, and half of renters are cost-burdened, which means a household spends more than 30% of its income on housing costs. Nearly one in four Colorado renter households are severely cost-burdened, which means a household spends more than 50% of its income on housing costs. Compared to people with middle incomes, Coloradans with low, very low, and extremely low incomes are increasingly more likely to be cost-burdened or severely cost-burdened. 

When developing affordable housing policy, it’s important to target Coloradans with the lowest incomes who face the most severe shortage; simply adding to the housing supply is not enough.

Options in the Tax Policy Toolbelt to Address Housing Affordability

TABOR is a major hindrance to directly funding the expansion of affordable housing through the budget, which is why tax expenditure mechanisms are often used as a work-around for funding programs in Colorado, via credits, deductions, or exemptions. However, housing affordability policies should be targeted to support those who are struggling the most to make ends meet. Additionally, affordable housing policy should include a funding mechanism that raises revenue dedicated solely to investing in new and increasing housing needs.

Targeted Relief Through Tax Policy

Property Tax Circuit Breaker 

Residential property tax relief can take two forms: across-the-board tax cuts for taxpayers at all income levels and targeted tax breaks that are given only to particular groups based on income. One common type of targeted property tax relief program is known as a “circuit breaker.”  Like an electric circuit breaker, a tax circuit breaker protects taxpayers from an overload.  That is, when a taxpayer’s property tax exceeds a certain percentage of income, the circuit breaker reduces the property taxes in excess of that level.  Consider a simple property tax circuit breaker set at 4% of income. Mary makes $20,000 and owes $1,400 in property taxes. The circuit breaker allows her to pay 4% of her income ($20,000 X 4% = $800).  But she owes more than $800, so Mary would get $600 in property tax relief from the circuit breaker ($1,400 – $800 = $600).  

This allows property tax relief to be means-tested and targeted.  In other words, a homeowner paying $4,000 in property taxes that makes $250,000 a year wouldn’t trip the circuit breaker, but a homeowner paying $4,000 in property taxes that only makes $15,000 would. 

Expand Renters’ Circuit Breaker 

Thirty states in the U.S. currently have some kind of housing circuit breaker program in place, and over two-thirds of those states––including Colorado––extend their programs to at least some renters. Since at least a portion of property tax liability is passed on to tenants, it is important to extend the savings of property tax relief to include renters, but like any equitable affordable housing policy, a Renters’ Circuit Breaker should target tenants who are cost-burdened and need relief the most. 

Renters’ Circuit Breaker programs (sometimes called a “Renters’ Credit” or a “Renters’ Property Tax Refund”)––are implemented in a variety of ways in different states. In Colorado, there is a limited Renters’ Circuit Breaker available in the form of a rent rebate for older Coloradans with low incomes and people with disabilities, and the rebate is refundable up to a maximum of $1,000 per filer. Minnesota is one example of a state that has a more expansive Renters’ Property Tax Refund; to receive this rebate, a tenant must have lived within the state for over 183 days, paid rent for housing that has property tax liability, received income under a certain threshold, and cannot be claimed as a dependent. In Minnesota, the refund amount that tenants may receive increases based on the number of dependents in the household as well as if the tenant or their spouse is 65 or older, or disabled.

In Colorado, expanding the state’s rent rebate to include renters with low incomes regardless of age is one strategy for advancing targeted affordable housing policy.

Raising Revenue Dedicated to Sustainably Affordable Housing Investment

Attainable Housing Fee

2023-2024 #3 – Establishment of a New Attainable Housing Fee is an initiative that has been titled as a potential ballot measure for November 2023, if sufficient signatures are collected. This measure would establish a Community Attainable Housing Fee, which would be leveraged on real estate transactions at the rate of 0.1% of the value of the property.

Revenue from the proposed Community Attainable Housing Fee would be directly funneled into the Colorado Attainable Housing Fund, and would only be used for certain purposes related to affordable housing. Those purposes include the construction, maintenance, rehabilitation, or repair of attainable housing for both rental and ownership purposes; the provision of financial assistance for individuals, nonprofits, and localities to purchase, refinance, rehabilitate, or repair attainable housing; and any new or existing programs that the Colorado Division of Housing determines appropriate to expanding the availability of attainable housing.

Establishing a Community Attainable Housing Fee provides an opportunity for Colorado to make sustainable, equitable, and economically efficient investments in developing housing that is affordable for more people at various income levels, which supports those with low and fixed incomes as well as middle income workers like teachers, nurses, and firefighters. 

Repealing the Real Estate Transaction Tax Ban

In 2022, CFI published a report on a potential Real Estate Transfer Tax (RETT) in Colorado. A RETT is paid when the title of a property is transferred between owners, separate from property taxes and recording fees. These taxes are often based on the value of a property, with a base amount exempted, making them a means-tested policy. Thirty-seven states levy a RETT. Colorado does not because RETTs are banned under TABOR. Many states use their RETT revenue to fund affordable housing. Despite being banned, CFI analyzed how much revenue a real estate transfer tax could bring to the state.

In Colorado, a 0.5% real estate transaction tax that exempts the first $200,000 of value of a home could generate $375 million into the State Affordable Housing Fund.  (This would be $2,000 on a $600,000 home sale). This funding mechanism is sustainable, as opposed to the current State Affordable Housing Fund mechanism established under Proposition 123, which would not yield any dedicated housing revenue in years that Colorado revenue falls below the TABOR rebate cap. 

Implementing a real estate transfer tax is equitable and efficient because it allows the state to invest this revenue dollar-for-dollar into expanding the availability of affordable housing for people who fall into a diverse range of income levels. This funding mechanism could also generate revenue to fund means-tested economic relief for homeowners and renters with low incomes.

Repealing the RETT prohibition would require a vote of the people at the ballot, brought either through signature gathering or legislative referral. 

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These are fiscal strategies to address the housing crisis — but there are many other policy tools as well. In the 2023 legislative session, we were disappointed to see state lawmakers vote down bills that would have implemented stronger eviction protections and allowed local districts the option to implement rent stabilization. Moving forward, we hope to see more support amongst legislators for targeted strategies that expand the accessibility of affordable housing for those who are struggling to make ends meet the most. Furthermore, Colorado needs a sustainable source of revenue that is solely dedicated to investing in a broad range of resources that promote housing affordability, accessibility, and security.