(The Center Square) — A bill seeking to limit tax deductions for Colorado businesses has some taxpayer advocacy groups concerned about its unintended consequences.
House Bill 21-1311 seeks to limit tax deductions for certain capital gains, contributions to college savings accounts, and other qualified deductions to fund an expansion of the Earned Income Tax Credit (EITC) and Child Care Tax Credit.
A demographic note attached to a bill by the Legislative Council Staff, a nonpartisan arm of the General Assembly, found that the legislation would limit tax deductions for Colorado businesses and could increase after-tax income for some low-income families in the state.
A range of taxpayers can qualify for the federal EITC, from single earners making $16,000 or less to married families with three children earning $60,000 per year.
However, Colorado’s EITC does not require applicants to provide a federal social security number to qualify. The credit is calculated as a percentage of its federal counterpart.
In turn, the bill would expand the Colorado EITC from 15% to 20% of the federal EITC for tax year 2022. Between 2023 and 2025, the state EITC would be increased to 25%.
It also seeks to benefit businesses by providing tax credits up to 50% of the cost a business incurs from converting to an employee-owned model, a cooperative, or a similar business structure.
Michael Fields, the executive director at Colorado Rising Action, a conservative advocacy group, worries that taking away the tax deductions could result in job loss. He argued that simply throwing money at the issue isn’t a solution.
“This is a much more complex situation that what this bill makes it seem,” Fields told The Center Square. “If businesses can’t provide jobs, that will hurt low-income and minority communities more.”
To help spur employment, Gov. Jared Polis launched a program in late May that will pay people up to $1,600 if they find full-time work by the end of June.
As of May 26, a total of 1,567 claimants have entered into the program, according to the state department of labor.