Oct 8, 2024

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CCLP Policy Forum: Tax credits & you recap

by | Oct 8, 2024

Intro

CCLP hosted our fourth iteration of our Policy Forum series which focused on tax credits, both at the federal and state level. While many might associate tax credits with big corporate loopholes and giveaways to the rich, we centered our presentation and discussion around tax credits that empower people in our communities to benefit directly.

Income is one of CCLP’s four focus areas, and tilting our tax code to benefit those facing income insecurity has been a focus of our advocacy and policy agenda for some time now. CCLP has partnered with other organizations and advocates throughout the legislative session and beyond to bring progressive tax policies to Colorado’s tax system.

Tax credit presentation

Charles Brennan, CCLP’s Income and Housing Director, shared a short presentation on tax credits in Colorado, providing definitions, examples, and the benefits and barriers to tax credits. According to Brennan’s simplified explanation, tax credits are available to you when you file your taxes—state and/or federal—and they work by reducing the income tax you would owe to the government.

In Colorado, taxpayers have the opportunity to receive multiple tax credits if you file your federal and state taxes. At the federal level, taxpayers might be eligible for the Earned Income Tax Credit (EITC), the Child Tax Credit (CTC), or the Child and Dependent Care Tax Credit (CDCTC). At the state level, taxpayers might be eligible for the Colorado EITC and CTC, and starting in 2025, the Family Affordability Tax Credit. Brennan also noted that Colorado’s tax credits are available to people without a work eligible Social Security number, so long as they have an individual tax identification number (ITIN).

While these tax credits are beneficial to many, there are some barriers and challenges to them. Many Coloradans who are eligible for these tax credits do not claim them each year. Additionally, federal tax credits are only available to those with a Social Security number. These tax credits are also designed to support families with children and often do not provide as much support to single adults without kids.

Panel discussion

After providing a short presentation on tax credits, Brennan introduced our three panelists involved in our curated discussion: Chaer Robert, Caroline Nutter, and Isabel Dickson. Each were asked a variety of questions relating to tax credits and their interest in the topic.

Currently serving as CCLP’s Emeritus Advisor, Robert first got involved with state tax credits in 1999, inspired by the power of cash for individuals because, as she put it, this form of public benefit “helps [Coloradans] set their own priorities.”

Caroline Nutter is the Legislative Coordinator for the Colorado Fiscal Institute (CFI). According to Nutter, CFI “cares about the EITC and CTC because they know how effective tax credits really are,” stating “they are one of the best anti-poverty tools we have.”

Isabel Dickson is the Economic Mobility Program Manager at the Colorado Department of Public Health and Environment (CDPHE). Dickson stated the reason CDPHE is interested in people’s economic status is because “poverty is a social determinant of health, meaning it’s a root cause of inequitable, poor health outcomes.”

TABOR & tax credits

We have seen a rise in tax credits in Colorado because we are limited by our Taxpayer Bill of Rights, or TABOR. TABOR is one of our constitutional restraints when it comes to tax policies, as it limits the amount of revenue the state of Colorado can retain and spend.[1] This means Colorado is often struggling to fund public programs, education, parks, and more.

When asked about the future of tax credits in Colorado, Nutter offered two solutions: fiscal reform and revenue generation. Because we are planning for a tighter state budget in the fiscal years to come, we are not going to see many TABOR surpluses like in the last few years. TABOR will continue to suck funds out of the state unless we reform the way we structure our tax code.

Raising any revenue for policies is difficult in Colorado, so one way to achieve our policy goals is to fund it through a tax credit. There is data to prove that tax credits are spent on school-related expenses, food, and childcare.[2] But as Brennan provided in his presentation, there are limitations to accessing tax credits such as language barriers, the fear of owing money to the government, and/or lack of awareness by individuals who may be eligible for tax credits.

Tax filing

The panel discussed the new tax filing resources found at Get Ahead Colorado. This bilingual public information campaign from the CDPHE connects people with accurate information on where and how to file their taxes. The website is available in English and Spanish (El sitio web está disponible en inglés y español.)

As discussed at the event, in 2026, filers will be able to directly file their state and federal taxes with Direct File, a free tax tool by the IRS, which will eliminate any expenses related to filing your taxes.[3] “Tax codes change from year to year,” Dickson stated, “but the message is simple and doesn’t change: file. We can all play a part in getting the word out to our families and communities.”

Community forum & Conclusion

The third and final section of the forum let community members ask our panelists questions and/or share their personal experiences with tax credits. Some of the topics covered included adjusted gross income, the Colorado child care contribution tax credit, incentivizing work through tax credits, tax preparation as a lucrative business, and more.

As the event wrapped up, Brennan reminded attendees that tax credits are an essential part of Colorado’s tax system, as they provide economic benefits for working and low income families. Many families rely on tax credits to increase their economic mobility and support their household. Because of the constraints TABOR has on our tax code, tax credits continue to be a critical piece of progressive tax policies in Colorado.

Thank you to all who attended our event. We look forward to hosting more policy forums in the future!

Watch the recording here.
Mira la grabación aquí.

**********

[1] https://leg.colorado.gov/agencies/legislative-council-staff/tabor

[2] https://www.commonsenseinstituteus.org/colorado/research/taxes-and-fees/colorados-expanded-tax-credits-targeting-lower-income-families

[3] https://tax.colorado.gov/press-release/saving-time-and-money-direct-file-for-federal-and-state-tax-returns-available-in-2026

 

Recent articles

HEALTH:
HEALTH FIRST COLORADO (MEDICAID)

Health First Colorado is the name given to Colorado’s Medicaid program. Medicaid provides public, low-cost health insurance to qualifying adults and children. It is an entitlement program funded by the federal, state, and county governments and is administered by counties in Colorado. Those who are required to pay must pay a small co-pay when receiving certain health care services.

State Department: Department of Health Care Policy and Financing

Eligibility: Most adults 18 to 64 are eligible for Medicaid in Colorado if their household income is at or below 133% of the federal poverty limit (FPL). Pregnant women are eligible with incomes of up to 195% FPL, while children under 18 may be eligible if the live in a household with income at or below 142% FPL. Some adults over 65 may also be eligible for Medicaid.

Program Benefits: Through Medicaid, low-income Coloradans are eligible for a range of health care services at little to not cost. Services provided include doctors visits, prescription drugs, mental health services, and dental care. Co-pays for certain individuals may be needed for certain services.

Program Funding and Access: Colorado funds our Medicaid program through state and federal dollars. Medicaid is an entitlement program, which means that all who are eligible for Medicaid can access the program, regardless of the funding level in a given year. This does not mean that it is always easy to access Medicaid, even when eligible. And since the program is administered by counties, funding levels for county staff and other administrative roles can make it easier or harder for Coloradans to access the program. On top of this, not all medical providers accept Medicaid which limits the ability of Coloradans to seek health services even if enrolled, such as if the nearest provider is a 2+ hour drive away.

Note: This data is from before the pandemic and does not reflect changes in enrollment rules during the COVID-19 pandemic and public health emergency.

Statewide Program Access 2015-19: Over the study period of this report, an average of 89.0% of the population at or below 133% of FPL (i.e., the population who is likely to be eligible for Medicaid) were enrolled in Medicaid in Colorado.

FOOD SECURITY:
SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM (SNAP)

The Supplemental Nutrition Assistance Program or SNAP helps low-income Coloradans purchase food by providing individuals and families with a monthly cash benefit that can be used to buy certain foods. SNAP is an entitlement program that is funded by the federal and state governments and administered by counties in Colorado.

State Department: Department of Human Services

Eligibility: Currently, Coloradans qualify for SNAP if they have incomes below 200% FPL, are unemployed or work part-time or receive other forms of assistance such as TANF, among other eligibility criteria. Income eligibility for SNAP was different during the study period of this report than today—it was 130% FPL back in 2019 for example. The US Department of Agriculture uses the population at or below 125% FPL when calculating the Program Access Index (or PAI) for SNAP. We follow this practice in our analysis despite Colorado currently having a higher income eligibility threshold.

Program Benefits: SNAP participants receive a monthly SNAP benefit that is determined by the number of people in their household and their income. Benefit amounts decrease as income increases, helping households avoid a sudden loss of SNAP when their incomes increase, even by a minor amount. Benefits are provided to an Electronic Benefit Transfer (EBT) card that can be used to purchase eligible food items, such as fruits and vegetables; meat, poultry, and fish; dairy products; and breads and cereals. Other items, such as foods that are hot at their point of sale, are not allowable purchases under current SNAP rules.

Program Funding and Access: SNAP, like Medicaid, is a federal entitlement program. This means that Colorado must serve any Coloradan who is eligible for the program. As such, funding should not be a limit to how many Coloradans can be served by the program. However, funding for administration of SNAP at the state and county level can limit the ability of county human service departments to enroll those who are eligible. Other program rules and administrative barriers can make it difficult for Coloradans to receive the benefits they are legally entitled to receive.

Statewide Program Access 2015-19: Over the study period of this report, an average of 61.1% of the population at or below 125% of FPL (i.e., the population who is likely to be eligible for SNAP) were enrolled.

FOOD SECURITY:
SPECIAL SUPPLEMENTAL NUTRITION PROGRAM FOR WOMEN, INFANTS AND CHILDREN (WIC)

The Special Supplemental Nutrition Program for Women, Infants, and Children, also know as WIC, provides healthcare and nutritional support to low-income Coloradans who are pregnant, recently pregnant, breastfeeding, and to children under 5 who are nutritionally at risk based on a nutrition assessment.

State Department: Department of Public Health and Environment

Eligibility: To participate in WIC you must be pregnant, pregnant in the last six months, breastfeeding a baby under 1 year of age, or a child under the age of 5. Coloradans do not need to be U.S. citizens to be eligible for WIC. In terms of income, households cannot have incomes that exceed 185% FPL. Families who are enrolled in SNAP, TANF, Food Distribution Program on Indian Reservations (FDPIR), or Medicaid are automatically eligible for WIC. Regardless of gender, any parents, foster parents, or caregivers are able to apply for and use WIC services for eligible children.

Program Benefits: WIC provides a range of services to young children and their parents. These include funds to purchase healthy, fresh foods; breastfeeding support; personalized nutrition education and shopping tips; and referrals to health care and other services participants may be eligible for.

Program Funding and Access: WIC is funded by the US Department of Agriculture. The state uses these federal funds to contract with local providers, known as WIC Clinics. In most cases, these are county public health agencies, but that is not the case in all Colorado counties. Some WIC Clinics cover multiple counties, while others are served by multiple clinics. Private non-profit providers are also eligible to be selected as a WIC Clinic.

Statewide Program Access 2015-17: Between 2015 and 2017, an average of 52.2% of the population eligible for WIC were enrolled in the program in Colorado.

Financial Security:
Colorado Works

Colorado Works is the name given to Colorado’s program for Temporary Assistance to Needy Families or TANF. It is an employment program that supports families with dependent children on their path to self-sufficiency. Participants can receive cash assistance, schooling, workforce development and skills training depending on the services available in their county.

State Department: Department of Human Services

Eligibility: In general, Coloradans are eligible to enroll in TANF if they are a resident of Colorado, have one or more children under the age of 18 or pregnant, and have very low or no income. For example, to be eligible to receive a basic cash assistance grant through TANF, a single-parent of one child could not earn more than $331 per month, with some exclusions—and would only receive $440 per month (as of 2022). That said, there are other services provided by counties through TANF that those with incomes as high as $75,000 may be eligible for. In addition to these, participants in TANF are required to work or be pursuing an eligible “work activity” or work-related activity. Any eligible individual can only receive assistance if they have not previously been enrolled in TANF for a cumulative amount of time of more than 60 months—this is a lifetime limit that does not reset. Counties may have additional requirements and offer benefits that are not available in other counties in Colorado.

Program Benefits:  While the exact benefits that one is eligible for under TANF can vary, all qualified participants are eligible to receive a monthly cash payment, call basic cash assistance. Other than cash assistance, counties are have a lot of choice in how to use their TANF funding; generally a use of TANF funds is appropriate so long as it advances one or more of the four purposes of the program: (1) provide assistance to needy families so that children can be cared for in their own homes or in the homes of their relatives; (2) end the dependence of needy families on government benefits by promoting job preparation, work, and marriage; (3) prevent and reduce the incidence of out-of-wedlock pregnancies; and (4) encourage the formation and maintenance of two-parent families.

It is important to note that those eligible for TANF are also eligible for many of the other programs we’ve included in this report, such as SNAP, Medicaid, and CCCAP.

Program Funding and Access: Colorado funds its TANF program through funds received from the federal government through the Temporary Assistance for Needy Families block grant. Most of the federal funds are allocated by the state to counties, which are required to provide a 20% match of state funding. Federal and state rules allow the state and counties to retain a portion of unspent funds in a TANF reserve.

Statewide Program Access 2015-19: Over the study period of this report, an average of 50.7% of the population at or below 100% of FPL (i.e., the population who is likely to be eligible for TANF) were enrolled in TANF in Colorado.

EARLY LEARNING:
COLORADO CHILD CARE ASSISTANCE PROGRAM (CCCAP)

The Colorado Child Care Assistance Program provides child care assistance to low-income families and caregivers living in Colorado in the form of reduced payments for child care. It is a program funded by the federal, state, and county governments and is administered by counties in Colorado. The share owed by parents/caregivers is determined on a sliding scale based on the family’s income.

State Department: Department of Early Childhood Education

Eligibility: Counties set eligibility for families separately, but must serve families with incomes at or below 185% of the Federal Poverty Limit. Families accepted to the program are no longer eligible once their income exceeds 85% of the state median income. Parents or caregivers must be employed, searching for work, or engaged in another approved activity to be eligible for CCCAP. Parents and caregivers enrolled in Colorado Works (Temporary Assistance to Needy Families or TANF) or in the child welfare system are also eligible to participate in CCCAP. Generally, CCCAP serves families with children under 13, although children as old as 19 may be eligible under certain circumstances.

Program Benefits: If a family is eligible for CCCAP and has income, they may likely have to pay a portion of their child’s or children’s child care costs each month. The amount that families owe is based on their gross income, number of household members, and the number of children in child care in the household. As such, households tend not to experience a benefit cliff with CCCAP when they see their incomes increase

Program Funding and Access: Colorado funds the CCCAP program using federal dollars it receives from the Child Care and Development Block Grant program. The state allocates federal and state funds to counties using a formula that takes into account factors like current caseloads and the number of eligible residents. Assistance is available until the county’s funds are spent, so the number of families that can be served is often a function of how much funding is available and the income and composition of the household that applies. It is not uncommon for counties to overspend or underspend their allocations of funds. The state reallocates unspent funds from counties who underspent to those who overspent. While underspending could indicate a problem with the way a county administers its CCCAP program, it could just as likely be a sign that there are few providers in the county who participate in CCCAP—or a lack of providers generally.

Statewide Program Access 2015-19: Over the study period of this report, an average of 10.8% of the population at or below 165% of FPL and younger than age 13 (i.e., the population who is likely to be eligible for CCCAP) were enrolled in CCCAP.

Housing:
HUD rental assistance programs

The US Department of Housing and Urban Development (HUD) has three housing assistance programs that we look at together: Housing Choice Vouchers (Section 8), Project-based Section 8, and Public Housing. In Colorado, these programs provided assistance to over 90% of the households who received federal housing assistance from all HUD programs. Through federally funded, local or regional public housing agencies (PHAs) are the agencies that administer these programs, through not all are available in all counties. These are not the only programs available in Colorado that assist households afford the cost of housing, such as units funded through federal and state tax credit programs.

State Department: Department of Local Affairs

Eligibility: Generally, households with incomes under 50% of the area median income (AMI) of the county they live in are eligible for these rental assistance programs, although PHAs have discretion to select households with incomes at higher percentages of AMI. That said, HUD requires that 75% of new vouchers issued through the Housing Choice Voucher/Section 8 program in a given year are targeted to households with incomes at or below 30% of AMI. PHAs are also able to create criteria that give priority to certain types of households who are on waiting lists for these programs.

Program Benefits: These rental assistance programs help households afford the cost of housing by reducing their housing costs to around 30% of their household income. In the case of the Housing Choice Voucher program, the PHA pays the voucher holder’s landlord the remaining portion of the rent.

Program Funding and Access: Funding and access are both challenges for these rental assistance programs. In addition to limitations on the number of public housing units or housing vouchers a PHA can manage or issue, lack of funding compared to the need constrains the ability of PHAs to assist low-income households. In 2020, Coloradans were on waitlists for Housing Choice Vouchers for an average of 17 months. Waitlists also exist for the other rental assistance programs.

Statewide Program Access 2015-19: Over the study period of this report, an average of 21.1% of renter households with incomes at or below 50% AMI (i.e., the population who is likely to be eligible for HUD rental assistance programs) were living in subsidized housing.