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CCLP testifies in opposition of a state income tax reduction
On Monday, February 12, 2024, Chaer Robert, CCLP’s Emeritus Advisor provided testimony to the House Finance Committee against House Bill 24-1065, Reduction of State Income Taxes. CCLP is in opposition of HB24-1065.
Thank you, Mr. Chair and Members of the Committee. I’m Chaer Robert and I am representing the Colorado Center on Law and Policy. We stand with diverse communities across Colorado in the fight against poverty.
Since the reductions in the State Income Tax Rate from 5% to 4.75% in 1999, I would constantly disagree with those who said, “an across-the-board income tax rate cut benefits everyone.” While rate reductions are more broad-based than many special interests tax breaks, those with income too low to owe income taxes benefit not at all. For example, a couple earning under $27,700 per year would not get any tax reduction, since their income is less than the standard deduction for 2023. In fact, they lose most of any TABOR rebate they would get if this bill passed, since the $1.3 billion in reduced state revenue would reduce the TABOR refunds by 73% for the next couple years.
Our main TABOR refunds are rebated through income tax filing for ease of administration but represent both sales tax and income tax collections. According to the 2022 Department of Revenue Tax Profile & Expenditure Report, the lowest income Coloradans pay the highest percentage (7.6%) of their incomes in state taxes, while those earning above $200,000 per year pay the lowest percentage of their income (4.1%) in state taxes, primarily because of our higher sales tax and flat income tax rate.
Does this bill help older Coloradans? Since those of us over the age of 65 get extra income tax breaks already, older adults are unlikely to get net benefit from the bill’s passage:
- Seniors have a higher standard deduction. If a couple is both 65 years and/or older, their 2023 standard deduction is $30,800 instead of $27,700.
- Coloradans pay no income tax on any Social Security earnings, effective with House Bill 21-1311.
- In Colorado, the first $24,000 of retirement income for each individual is not taxed. So, individuals can claim the greater of Social Security income or up to $24,000 each in overall retirement income.
This means a couple that is both 65 years and/or older likely do not pay Colorado income taxes unless their income exceeds $78,700. For an individual filer over the age of 65, their income would need to exceed $37,850. For most seniors, the main impact of this bill would be a much smaller TABOR refund.
Please oppose House Bill 24-1065.
Sincerely,
Chaer Robert
Emeritus Advisor
Colorado Center on Law and Policy
Update 2/12/2024: HB24-1065 was postponed indefinitely on February 12, 2024.