The first batch of state Senate bills popped into the online queue Wednesday, hours after session ended. But one was missing at first: Senate Bill 1, reserved for President Bill Cadman.
, and it’s a big one. The measure would change how the state awards refunds under the state’s Taxpayer’s Bill of Rights — essentially shifting who gets the most money back when the state exceeds its TABOR revenue cap.
It’s a complicated topic, but the analysts at the Colorado Fiscal Institute broke it down. (Spoiler alert: The left-leaning policy organization actually likes the bill.)
Here’s the nuts-and-bolts from the institute for those who want to know. (If it’s too much, skip below to the analysis.) First, the current system. How the money is returned depends on the size of the excess revenue:
–If it’s up to $97.7 million, it goes back to taxpayers through a sales tax revenue, broken down along six tiers.
–If it’s between $97.7 million and $294.6 million, the first $85.8 million goes to the earned income tax credit, or EITC, a program that gives checks to low-income working people, and the rest goes to the six-tier sales tax break.
–If it’s more than $294.6 million, it’s first the same EITC refund, then a temporary income tax break and next the six-tier sales tax rebate.
Under Cadman’s bill, the EITC remains untouched. What changes is the six-tier sales tax refund. SB 1 would create a three-tier sales tax refund based on federal adjusted gross income levels, tweaked from typical definition to include Social Security payments and lump-sum pension or stock option payments. It keys off the Department of Revenue’s determination of a “single percentage” that factors in the taxpayers in each tier and how much is available for the refund. (I told you this was complicated.)
The three tiers for the sales tax refund, which adjust over time by the consumer price index, are:
–For taxpayers whose AGI is $36,000 or less, the rebate is equal to $36,000 times the single percentage
–For those between $36,000 and $117,000, the rebate is their adjusted AGI multiplied by the single percentage
–For those over $117,000 the rebate amount is $117,000 times the single percentage.
If you skipped down, or you’re lost, here’s what you need to know: According to the institute, it means that a greater percentage of the tax break does to people making an adjusted gross income between $36,000 and $117,000.
This is essentially, sort of the middle class. Though the “middle class” has no actual definition, at roughly $25,500 to $76,500. (Click the link for an interesting piece on the topic.)
The institute’s executive director, Carol Hedges, wants a ballot measure that asks the voters to allow the state to keep and spend the money. But if not, she said, “the new structure under Senate Bill 1 actually makes the rebate mechanism better.”
“We commend Senate leadership for a well-considered, well-crafted proposal,” she said in a statement.
On a political note, this may make it palpable to Democrats, given it’s targeted beneficiaries, the middle class Democrats have been talking about over and over since session started.
However, the bill does include a few interesting caveats. It would prevent those convicted of certain misdemeanors and felonies from receiving the TABOR sales tax rebate. It also requires the Department of Revenue to divert the money toward court-ordered restitution or child support for those with outstanding balances.
Asked about the bill Thursday morning, Cadman’s office said it is preparing a summary, but we didn’t hear back yet.
