#1 — $400 checks looking like $750 now

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Sizable revenue collections this past spring have grown General Fund revenue by 21.8 percent. This increase pushed the TABOR surplus – the amount that is expected to be collected above the Ref C cap – to $3.56 billion from the previously anticipated $2 billion. The expected sizes of TABOR rebates are now $750 for single filers and $1,500 for joint filers, almost doubling from initial predictions at the end of May of $400 for single filers and $800 for joint filers.

The legislature took action this year, creating a fairer way to distribute these one-time rebates, putting more money in the pockets of our workers and families. Through SB22-233, a temporary rebate mechanism was created to give every eligible Coloradan an identical amount of TABOR rebates, no matter their income or filing status. Rebate checks of $750 ($1500 joint) will be distributed in advance of filing your 2022 taxes and are expected to hit mailboxes this summer. Without the legislators acting, we would have seen a vast majority of the $3.56 billion go through an outdated six-tier sales tax refund, which gives the highest refunds to the highest earners and the lowest refunds to the lowest earners.

Though these advanced rebate checks are an improvement to an otherwise unfair system that takes dollars away from better funding public services, they will only occur this year. Legislators will face a similar choice next year when SB22-233 expires and TABOR surplus predictions continue to be in the $3 billion range for FY 22-23.

#2 — Colorado job growth outpaces the Nation

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 #3 — Inflationary pressures continue to rise

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#4 — TABOR Rebates in subsequent years

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#5 — Recession watch

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In March 2022, several ballot measure titles were filed that would, in various ways, limit or cap property tax
revenues collected by local districts in Colorado. Over forty years ago, California attempted a similar
experiment to ease the increasing property taxes of a state growing exponentially. Its own ballot measure,
Proposition 13, which capped property values for tax purposes and property tax rates, was not targeted and
the proponents had no plan to pay for it.

As a result, the measure cut the local share of school funding in half, and sales tax revenue as a share of local revenue almost doubled. While older, longer-term homeowners benefitted massively, new homeowners and young families saw little change in their property tax bills. And without adequate funding, a shifting and smaller tax base led to skyrocketing student-to-teacher ratios and dramatic cuts in per-pupil funding.

Ultimately, this type of property tax limitation would take away more money from our underfunded K-12 schools and cause substantial economic distress in the ever-growing state of Colorado.

Highlights:

• Proposing this property tax limitation in Colorado will reduce local government revenues by almost $2.5 billion annually and cost the state over $650 million a year in backfill dollars causing detrimental blows to our economy.
  
• California saw Proposition 13 catalyze a major decrease in tax deduction claims that lead to a major increase in the state’s internal and federal tax bill furthering economic instability.
  
• If this proposition passes, we would see a drastic decrease in funding for our K-12 schools that are already extraordinarily underfunded.
  
• Like California, Colorado would likely see an even greater increase in sales tax which would negatively affect the most financially vulnerable in our state.

Click here to download the full brief.

Why are gas prices so high?

For the last month, Colorado’s average price per gallon of gas has been stuck at around $3.96 per gallon — very close to the all-time record of $4.09 in 2008. In order to ease the impact of rising prices at the pumps, Governor Polis has called for a federal gas tax suspension, and asked the Colorado General Assembly to delay the implementation of SB21-260, a $5.3 billion transportation funding bill that Gov. Polis signed into law last year that raises the fee on gas sales starting at 2 cents per gallon in July of this year. 

There are a few contributing factors to this increase in price, but the primary reason is the Russian invasion of Ukraine. On March 8, President Biden announced that the U.S. was banning imports of oil from Russia in response to its invasion of Ukraine. Though Russian crude oil makes up only about 3 percent of U.S. oil imports, any reduction in supply results in higher gas prices for consumers. Combined with COVID-19 restrictions relaxing and summer approaching, there is currently much more demand than supply for fuel.

The graph below shows the average annual price of gasoline from 1976 through 2021 in the United States. The orange line shows the price consumers paid at the time, while the blue line shows the price adjusted for inflation. You can see that even though prices are nominally high, they’re still lower than they were in the early 1980s and mid-2000s and 2010s.

What do we pay in gas taxes?

The federal gas tax is 18.4 cents per gallon and has not increased since 1993. Since it is not adjusted for inflation, the real value of the federal gas tax has been declining. The gas tax is the main source of revenue for the Highway Trust Fund, which funds federal road and bridge projects. This stagnant funding stands in stark contrast with the price of construction projects according to an analysis from the Institute on Taxation and Economic Policy, which found a 185% increase during the same period. For this reason, and because vehicles have become more fuel efficient, the purchasing power of the federal gas tax has declined by 72 percent since 1993. 

Coloradans also pay a state gas tax of 22 cents per gallon. Beginning in July 2022, as a result of SB21-260, motor fuels are subject to additional fees starting at 2 cents and eventually reaching 8 cents, which will be phased in between FY 2022-23 through FY 2028-29 and then indexed to the National Highway Construction Cost Index. However, lawmakers and Gov. Polis appear poised to delay the implementation of that law in an effort to help people with rising costs.

What will a gas tax holiday do?

There has never been a federal gas tax holiday, however it’s reasonable to expect that it won’t do much, if anything, to reduce fuel prices. Part of the reason is because the tax is levied on producers, not consumers. Oil companies simply pass along those costs to consumers. Because the demand for fuel and the supply of fuel aren’t affected by a tax as small as the federal rate, it’s entirely possible the price will go up enough to eat away most of the savings.

Even if the savings do reach them, 18 cents a gallon is not enough to create meaningful relief. On average, U.S. drivers travel 13,500 miles a year, according to the U.S. Department of Transportation’s Federal Highway Administration. If you drive 13,500 miles a year and your car gets 24 miles per gallon, it would amount to less than $10/month in savings. With current prices, that’s less than a quarter of a tank for most small cars.

While the savings aren’t guaranteed, a gas tax holiday carries huge costs for the public services the taxes pay for. In 2020, Americans used about 123.7 billion gallons of gasoline. Assuming a similar consumption for 2022, lifting the 18.4 cents gas tax for the rest of 2022 would cause the loss of about 17 billion dollars. 

What about climate change?

The transportation sector is the largest source of pollution contributing to climate change in the U.S., accounting for a little less than one-third of emissions. A gas tax cut could result in higher fuel consumption. A study by the University of Pennsylvania shows that under such a tax cut, from March to December 2022, the average gasoline consumption per capita in Colorado would increase by 0.84 to 2.47 gallons (depending on demand elasticity).

This is especially frustrating because Colorado is already behind when it comes to meeting our climate goals according to the state’s greenhouse gas reduction roadmap. If we want to achieve those goals, we need to accelerate the transition to clean energy in the transportation sector and invest in public transportation and electric vehicle infrastructure. We need policies that move us away from burning fossil fuels, and a gas tax holiday would work in the opposite direction.

Can’t we just drill for more oil?

It’s reasonable to wonder whether increasing domestic oil production would increase supply to meet the rising demand for gas. However, domestic gas prices are driven largely by global oil prices. There are a number of other challenges that mean ramping up production might not even be possible on the scale needed to lower prices.

Additionally, increasing domestic production is not simple. Oil producers are facing a shortage of workers and equipment as a result of the pandemic. Gasoline supply is also constrained by refining capacity, not just oil production. U.S. refineries are built for lower quality crude oil that is imported from other countries, not the higher quality crude that is produced domestically. For that reason, we would likely be exporting the increased production rather than shipping it domestically. 

Moreover, here in Colorado oil companies are currently sitting on thousands of permits. At least two local companies told investors on earnings calls earlier this year that, despite having the permits, their company intended to use the windfall from high oil prices to pay dividends to shareholders rather than invest in increased production. 

Are there any other alternative solutions to give people relief on gas prices?

A gas tax holiday would do little to help working families, it wouldn’t do anything to increase supply or reduce demand for gas, it would significantly reduce federal revenues, and would delay the necessary transition away from fossil fuels. That is all aside from the fact that it wouldn’t target relief to the people who need it most. There are better, more targeted policies that can be implemented to help families at times of high inflation, such as tax credits like the Earned Income tax Credit (EITC) and Child Tax Credit (CTC) that help people who earn low incomes afford basic needs. Directing cash into the hands of workers and families is proven to stimulate economic activity locally, and it would be a more effective and efficient way of helping people afford high gas prices.

Instead of temporarily suspending the gas tax, Congress could alleviate some of the effects of fuel inflation by permanently making the CTC fully refundable, permanently extending the CTC to children of immigrants who pay taxes with an Individual Tax Identification Number, continue to pay the CTC out in monthly installments, expand the EITC to younger workers below the age of 25, and bolster the size of both programs.

#1 – Inflation continues to squeeze family budgets

U.S. headline inflation was 7.9% in February, the highest rate in 40 years. Ongoing pandemic-induced supply chain disruptions, the war in Ukraine, and wage increases are all contributing. Transportation, energy, housing, and food are the biggest components of price increase locally. This caused Legislative Council to double their 2022 inflation estimate from 3.4% in December to 7% now. That projection will affect the next year fiscal year’s budget (FY2023-2024). Inflation is also affecting how much revenue the state can retain and invest in public services (more on that below). Inflation remaining high means lawmakers should be focused on targeting fiscal and economic policies at people who earn low and moderate incomes who are getting squeezed hardest.

#2 – $2 billion in TABOR rebates this year, but less in coming years

This year’s rebates are twice as big as any that came before, but while state economists revised 2022’s rebates up from $1.87 billion at the December forecast, rebates in the years to come are now expected to be much lower. As the risk of a recession starts to creep back up and the 7% inflation figure in 2022 increases the Ref C cap, the actual number has major policy implications elsewhere: Lawmakers are still considering plans that could make TABOR rebates fairer by being less slanted toward the wealthy. Elsewhere, advocates have filed a ballot initiative that would ask voters to forego about $800 million of their TABOR rebates and send that money into the State Education Fund.

#3 – A likely temporary situation calls for smart, one-time investments

Revenue is higher for a few reasons. First, federal fiscal stimulus propped up the economy through paycheck protection programs, unemployment insurance, and other temporary measures. Second, the pandemic recession had only minor impacts on many high-income earners, who make up a large share of the income tax base. All of this means lawmakers coming budget will have $3.2 billion more to spend than the current budget. However, many economists predict this trend is unlikely to continue, and higher deficits and inflation will probably temper the level of federal intervention in the next recession. This all means lawmakers should focus on policies that make one-time investments in people, not permanent changes based on temporary circumstances.

#4 – Colorado is nearly back to pre-pandemic jobs numbers

The state has recovered 98.4% of the jobs lost since March 2020. That’s better than the 90.4% figure nationwide. The sectors with the most jobs that haven’t yet returned to pre-pandemic levels are in the hard-hit accommodations and food service sector, which makes sense given how long the pandemic has dragged on. Despite these gains, Colorado’s unemployment rate was 4.1% in January compared to the U.S. rate of 3.8%. While that might sound bad, it’s due to Colorado’s high labor force participation rate, which is third highest among states. CFI Executive Director Kathy White talked to The Colorado Sun about that this week.

#5 – Strong wage gains for low-wage workers getting eaten by inflation

Wage growth in beginning of 2022 has favored Colorado workers who earn low wages. According to the 12-month moving average of wages, the workers in the lower 25% saw their wages rise 5.8%, followed by 4.2% increase in the next 25% of workers. Low-wage workers haven’t seen wage growth that strong since 2007. Unfortunately, that high inflation is making it so workers are spending most of those gains on more expensive goods.

What was the Marshall Fire?

On December 30, 2021, the Marshall Fire, a prairie grass wildfire in Boulder County destroyed or damaged almost 1,300 homes and businesses. The severity of the fire, which spread from unincorporated Boulder County to the towns of Superior and Louisville, was largely due to gusting winds of up to 100 miles per hour. Before it was extinguished, the fire burned 6,000 acres and forced 35,000 people to evacuate. Thousands of people continue to be displaced, and the cleanup and rebuilding process is likely to last years. The fire was the most damaging in terms of structures destroyed in state history, but what was most shocking was the fact it happened not during the heat of summer, but at the end of December.

December of 2021 was an extremely warm month for Colorado. Our average statewide temperature was more than 7 degrees warmer than the historic monthly average for December. December was also dry, particularly for the urban corridor and Eastern Plains. Although average statewide precipitation from October through December 2021 was only 0.3 inches less than the long-term average for the same period, Boulder County received only 0.66 inches of precipitation in the last three months of the year, which was 2.64 inches less than the long-term average.

Another factor at play in the severity of the damage caused by the Marshall Fire is residential and commercial property development in the Wildland Urban Interface (WUI). WUI refers to the areas where urban development occurs in proximity to natural areas and vegetative fuels with little clearance. The map below shows the area within the Marshall Fire boundary located in the WUI. In total, 2,745 acres burned in the boundary were in the WUI.

With the area of the WUI in Colorado topping more than 3.2 million acres, it’s possible more communities will have to contend with fires similar to the Marshall Fire in the future.

Climate change is projected to exacerbate warm and dry conditions across Colorado in the years to come. Most places will experience more warm days and precipitation is projected to decrease in most parts of the state, which will lead to drier vegetation and more susceptibility to burning.

Last year, CFI released climate research that looked at how different climate scenarios could play out for Colorado. Under a business-as usual-emission scenario, some areas of the state will experience more than 100 days with temperatures higher than historic high temperatures, and many places will experience 50-60 percent less precipitation by 2050. These conditions will put more communities at risk.

Climate projections show that limiting increases in emissions will significantly limit the effects of climate change compared to business-as-usual practices. That makes it essential to take action now to avoid potentially irreversible damage to our ecosystems, which will have a catastrophic effect on Coloradans and our economy.

Failing to act on climate change will create significant costs for Colorado: In 2020 alone, Colorado suffered $1.7 billion in costs from wildfires and drought. Without significant emission reductions, these costs are expected to increase over the next few decades.

The economic costs will be great, but the human costs will be even greater. With more extreme heat and ozone pollution, it will be Coloradans with respiratory illnesses, people who work outdoors, young children, and older people who will all be disproportionately affected by health problems caused by climate change.

Colorado and the country must do more to mitigate these issues by passing policies designed to curb emissions, create more resilient communities, and invest in the health and well-being of the people who make up our economy.

By Chris Stiffler

#1 – Remarkably strong General Fund growth

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The General Fund is projected to grow by 11.7% next year, coming off an equally strong 10.7% growth last year. That’s well above the normal trend line. The major components of the General Fund (income taxes and sales taxes) are exceeding expectation. Wage pressures, strong business activity, and employment growth are fueling these strong revenue numbers. Revenue is also being bolstered by consumers shifting toward buying more tangible goods, which are taxed, and away from less-often-taxed services. This results in a $791 million upward adjustment in revenue expectations from the September forecast, which means there will be $3.2 billion above what was spent in last year’s budget.  That increased revenue is more than enough to cover the costs of the Governor’s budget proposal.

#2 – Record-breaking TABOR rebates

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Stronger-than-anticipated revenue projections mean a large upward revision to the size of TABOR rebates next year. In September, a $1 billion FY 2021-22 TABOR surplus was projected, now we are looking at a $1.9 billion TABOR surplus next year. These would be the largest TABOR rebates ever (the previous largest was $941 million in 2000). It amounts to $410 for a tax filer making $50,000. Over the next three fiscal years, TABOR rebates are estimated to be $5.6 billion. This money won’t be available to modernize government services or restore reductions forced by the last three recessions.

#3 – Lower inflation for Colorado than nationally

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The national year-over-year inflation rate in November was 6.5% with the energy and transportation components leading the spike. Legislative Council projects the final annual inflation rate at 3.7% for Colorado. Our state’s inflation percentage is lower than the national number for a mix of reasons. The index used to calculate Inflation has a mix of components, but one of the biggest parts of the index (44 percent) is the housing component. It may seem counterintuitive, but since Colorado has seen such large housing price pressure over the last few years, our housing prices are cooling down now on a percentage basis. In essence, housing inflation was already “baked in” to the overall number.

The calculation of inflation has significant implications for state spending. Inflation is a factor in the school finance formula and the TABOR revenue cap (Referendum C cap). For example, the inflation rate directly affects the amount of TABOR rebates required. Every 1 percent increase in inflation rate means that the state can keep an additional $160 million. While it is a big factor, revenue growth is so strong right now that even if the Colorado rate were to catch up with the Federal inflation rate, TABOR rebates would still top $1 billion.

#4 – The virus is tamping down school enrollment

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Compared to the 2020 December forecast, actual public-school enrollment was 2.6 percent lower (about 22,500 students) than expected. Last December’s forecast assumed a strong increase from the steep decline from 2020, however that bounced back didn’t occur. Total kindergarten enrollment did increase by 6.2 percent from the cohort of new students who delayed enrollment in kindergarten in the fall of 2020 and instead started in fall 2021.

Housing affordability is also contributing to a shift in the distribution of school enrollment as the high housing costs in the Denver Metro area and the resort communities are pushing more families to school districts in more affordable places. The combination of fewer students and more local revenue collections than originally projected will create an opportunity for real progress toward reducing the Budget Stabilization factor, a number that tracks per-pupil funding compared to inflation over time.

#5 – Workers are rethinking their careers

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Colorado’s unemployment rate fell to 5.4% in October, still higher than the national unemployment rate of 4.2% and much higher than Colorado’s 2.5% pre-pandemic rate. Colorado has regained 83% of the jobs we lost since February 2020, which means there are still 62,700 fewer jobs in Colorado today than there were before the pandemic. Many jobs that haven’t returned pay low wages, while jobs that pay more than $60,000 a year are up 8.6 percent. There’s been a noticeable drop in the number of part-time jobs, which also tend to pay lower wages.

While employment has actually recovered more quickly than during the Great Recession, what’s different this time around is the number of job openings exceeding the number of people who are unemployed. The number of employed workers ages 25-54 is below the level of other aged workers, which is likely due to many workers reconsidering the work they are doing and their work-life balance in the wake of the pandemic.

By Chris Stiffler

What’s in the budget proposal?

Every year, state law requires the Governor to propose a budget for the coming fiscal year. While this document is long and contains a great deal of important areas of spending, it is simply a proposal. While the Governor’s budget proposal can act as a starting point, the Joint Budget Committee will begin crafting the budget over the coming months, and the governor will decide whether to give that document the stamp of approval.

Though it’s usually thought of as aspirational, many pieces of Gov. Polis’ proposals (e.g. full-day kindergarten) have ended up becoming law. Here are the top takeaways from the governor’s proposal for the coming fiscal year.

The General Fund reserve (should) weather the next recession

The General Fund reserve is like the savings account for the state. The reserve is money set aside in case revenue doesn’t reach estimates or isn’t enough to pay for required spending. Since 1986, Colorado has averaged about a 4 percent annual General Fund reserve. The Governor’s FY 2022-23 budget sets the reserve at 15 percent of General Fund spending, or about $2 billion. A 15 percent reserve would give Colorado much greater ability to weather a “typical” economic recession without making drastic cuts. For example, during the 2001 and 2009 downturns, Colorado’s General Fund revenue fell by more than 13 percent. In those years, the reserve was around 4 percent of state spending, so falling revenue meant cuts to programs, particularly K-12. A 15 percent reserve is likely to give the General Assembly a much larger cushion for the next economic downturn.

“Budget Stabilization” factor will be the smallest since 2013 

The budget stabilization factor, a budgeting policy that allows the state to avoid making its full constitutionally required investment in K-12 education, peaked at 16 percent of total K-12 program spending in FY2012-13. The Governor’s budget request proposes an additional $150 million to K-12 above the increase of inflation and pupil growth above this year’s budget. If approved, that additional $150 million could lower the “budget stabilization” factor to 4.7 percent of total program funding. This would be the closest Colorado has been in a decade to paying the full amount required under Amendment 23’s formula of annual growth of inflation and student increases. The Governor also proposes to pre-pay an additional $300 million to the State Education Fund to help maintain that higher level of investment in schools.

Structural deficits in the General Fund remain high

The Governor’s budget emphasizes that the current revenue picture is temporary, and that revenue is expected to return to growth rates closer to the 20-year average in the next three years. This reminder of the temporary nature of the current revenue picture is underscored by a reminder of the impact of TABOR rebates on the state’s ability to adequately fund public services. Because Colorado is not allowed to keep and use the revenue collected from taxes and fees coupled with the costs of services increasing faster than the rate of consumer inflation, the state will soon face a situation where allowable revenue will not be sufficient to cover the cost of ongoing services.

Some large one-time investments

Because of the temporary nature of the current revenue picture, $1.2 billion of the Governor’s proposals are one-time investments coming from federal stimulus dollars and unexpected General Fund dollars over the last two years. This includes $600 million to the Unemployment Insurance Trust Fund, $424 million in clean air initiatives (including an effort to electrify of Colorado’s school bus fleet).

Additionally, the proposal includes $104 million to help offset premiums of the newly enacted paid family and medical leave program. That money is meant to reduce total premium costs by 10 percent for the first six months of the program’s premium requirements. 

State government turns to housing

The budget proposal includes $200 million in new state funding to help cities address issues related to increased numbers of people experiencing homelessness. It also includes $400 million for affordable housing, much of which will go to provide infrastructure grants for local communities to build housing.

In Colorado, there’s no such thing as an off-year when it comes to voting on fiscal policy. This year, Coloradans are voting on three statewide ballot measures, and we want to make sure you know how we feel about them:

Amendment 78

What the Measure Would Do

Amendment 78 would change the way Colorado can distribute certain money not collected in taxes, otherwise known as custodial funds. These include, among other examples, money the state receives in federal funds and legal settlements (e.g. tobacco company lawsuits). This measure would move the authority for distributing that money from the governor and state agencies to the General Assembly.

Our Take

The biggest problem with Amendment 78 is that, in general, the current system is working. The executive branch determines how that money is spent and the legislative branch has oversight and can ensure the money is spent appropriately. This amendment is a poorly crafted solution in search of a problem.

Our Recommendation

Ultimately, with the General Assembly being a part-time legislative body that meets for 120 days from January to May, requiring legislative action to appropriate these funds creates uncertainty that they would be appropriated in a timely manner. Most critically, this measure would unnecessarily delay federal aid for floods, wildfires, and other disasters. That’s something our communities can’t afford. We recommend a no vote.

Proposition 119

What’s The Measure Would Do

Proposition 119 would increase the sales tax rate on recreational marijuana in order to fund a new program that would pay for out-of-school learning opportunities for kids whose families earn low incomes—a disproportionate number of whom are kids of color. Out-of-school learning opportunities are far too often limited to those kids whose families have the means to afford them, and their educational benefits are key to helping remove barriers to academic success.

Our Take

While CFI supports the goals of this measure, we have mixed feelings about the details of how Proposition 119 plans to accomplish the goal. First, it’s unclear whether a tax increase on marijuana is progressive or regressive because the data simply doesn’t exist to make that determination. Second, while most of the money will come from dedicated marijuana tax revenue, it will divert some General Fund money too, and that could create a situation in lean budget years where in-school K-12 funding could see cuts in order to fund out-of-school learning. Finally, the governing body of the Board and the lack of direct legislative oversight gives us pause.

Our Recommendation

Our staff did not come to a consensus on a yes or no position, therefore CFI is neutral on this measure.

Proposition 120

What The Measure Would Do

Proposition 120 is a confusing ballot measure, not just because property taxes are complicated (check out this video we produced last year that explains Amendment B, which repealed Colorado’s property tax-limiting Gallagher Amendment), but because the measure won’t actually do what the ballot language says. Voters who get their ballots will see a question on reducing the statewide assessment rate on residential and non-residential property by $1 billion. However, action taken by legislators in the 2021 session changed what will happen in Proposition 120 passes, and the end result will be a property tax reduction that only applies to multi-family and lodging properties. 

Our Take

We know many property owners—especially people who earn low incomes—are feeling pressure from rising property values and corresponding increases in taxes. However, this measure is not the way to help people who are having trouble making ends meet.

Our Recommendation

The vast majority of the tax cuts will go to people who can afford expensive houses that carry the highest property taxes. Additionally, because of existing inequities in funding for schools, this will only deepen K-12 education funding problems, especially for rural communities. Property taxes also fund numerous local services and this measure will likely result in cuts, especially for places where property values are not rising as quickly as other areas of the state. For these reasons, we urge a no vote.

Thank You For Being An Infomed Voter

Regardless of how you vote, thank you for taking the time to learn about what’s on your ballot and voting. By voting, you’re sharing your voice and acting to make a difference in your community. This is especially true in Colorado, where voters are the tax policy decision makers, and those tax policy decisions have very real effects on whether or not our communities are thriving places where everyone has the opportunity to succeed.

Voter Resources

Obviously, we have our opinions about these measures, but we know our opinions aren’t the be-all and end-all. That’s why we’re proud to once again be partnering with other organizations as part of Count Me In. That effort provides factual, unbiased information about sometimes complex statewide ballot measures in a way that’s designed to be accessible for everyone. Visit Count Me In’s website to read the 2021 ballot guide and visit their Voter Resources Page for resources like the Blue Book, voter registration, and other community ballot guides.

By Carol Hedges

How is Colorado’s economy doing?

As we noted when state economists released the most recent revenue forecasts, the data show Colorado’s economy is rebounding from the pandemic. Incomes have more than fully recovered for people who earn high incomes, and even sectors most affected by COVID are seeing significant income growth.

Income growth propels job creation, economic vitality, and increased state and local revenue. In a sharp contrast to March and April 2020, which showed how a bad public health scenario can create drastic economic fallout, we’re now seeing how good economic conditions create waves of more good news.

What’s the Child Tax Credit got to do with it?

While the distribution of COVID-19 vaccines and subsequent loosening of public health restrictions has been the primary driver for this economic growth, another major contributor to increased well-being, especially in low- and moderate-income families, is the expanded federal Child Tax Credit (CTC). Congress increased the size and the reach of the CTC in the American Rescue Plan, and it’s making a real difference for kids, their families, and the state’s economy.

First, let’s talk about what it’s doing for kids. Especially kids in families who are struggling to afford basic needs like food and rent. For kids, there are benefits in both the short and long term. Recent reports show fewer kids are going hungry now that monthly advance payments of the CTC have been going directly to families, and data from years of experience with direct cash infusions prove there are long-term positive impacts for kids. These include being more likely to graduate from college, higher future earning, and even leading longer, healthier lives.

For families living in poverty, the cash available through the credit helps them meet basic needs like clothing, rent, utilities, and other expenses like car repairs. These families, especially those most strapped for cash, are spending this money immediately. They’re also more likely to spend it in their communities. 

How much money does the Child Tax Credit expansion mean for Colorado?

We’ve seen time and again that economic activity increases when all families are able to meet their needs, and our collective economic well-being is built on that economic vitality. According to newly released data from the IRS, monthly CTC payments are infusing $255 million into our state economy every month. That will add up to over $3 billion in the next year. While that’s a substantial sum in and of itself, there are indirect benefits from this increased economic activity. It propels purchases at local businesses. It means rents and mortgages get paid on time, restaurants have more customers, local retailers are selling more products, and the dollars circulate to create even bigger impacts. This is known as a multiplier effect.

We often see these kinds of multiplier effects when businesses and industries want to tout their economic influence. For example, the University of Colorado—the state’s flagship university and one of Colorado’s largest employers—said in 2019 their economic impact was $1.9 billion over a four-year period. Recent reporting from The Denver Business Journal showed immersive art company Meow Wolf’s new installation in Denver has the potential to generate over $2.5 billion in direct and indirect economic activity. If we apply multipliers used in economic studies of other cash infusions, the economic value of the providing the CTC to all families could end up being over $6 billion annually.  A recent study from Columbia University suggests that the societal multiplier for the expanded credit may be even higher, primarily due to the future health and economic impact expected from investments in the CTC. Anyone who works in economic development has to love hearing that, and they ought to be the biggest advocates for keeping this historic reduction in poverty on the books as-is. 

Who’s trying to limit the Child Tax Credit?

Being able to see and feel the benefits of these investments must mean support for these improvements to the equity of our tax code is universal, right? Well, unfortunately, some members of Congress want to limit the availability and coverage of these tax credits by proposing policies like limiting the refundability of the credits and imposing a work requirement for eligibility.

The expanded, fully refundable credit is expected to reduce child poverty by more than 40 percent, breaking the intergenerational cycle of long-term hardships for millions of families that come from growing up living in poverty. Boosting educational attainment, earnings and health means a better path through adulthood for hundreds of thousands of our friends and neighbors. These benefits are particularly powerful as tools for changing the economic trajectory for Black and Brown kids. 

Reducing barriers to making ends meet for the lowest income households means they’ll have more money for child care to support their work, higher chances of stable living arrangements that support school achievement, and better nutrition and health for all family members. But we only get the benefits if everyone continues to be eligible, and full refundability is protected. This will ensure that the most families and kids can overcome the barriers that for too long have kept them away from economic opportunities. 

Why Congress needs to extend the Child Tax Credit expansion

The CTC expansion, along with the other components of the Build Back Better Agenda, is an important goal. The pandemic laid bare the impact years of systemic racism and oppression built into our government policies has on everyone regardless of their skin color or income. For a long time, our economic policies have limited the potential of our economy by leaving some people behind and leaving others out altogether.

The expanded Child Tax Credit is demonstrating the power of inclusive and comprehensive investments to fuel real economic progress. Congress must all they can to make sure that a fully refundable child tax credit is a centerpiece of efforts to build a stronger economic future for our kids.