Rep. Daniel Kagan, is sponsoring legislation to allow those receiving a tax refund to deposit it in more than one account. (File photo by Craig F. Walker/The Denver Post)
Here’s an interesting piece of legislation for tax day: splitting up where your state refund goes. would allow taxpayers to get their refund from a combination of an old-fashioned check, direct deposits into one or more savings accounts, one or more checking accounts and/or one or more .
The way it works now, a refund can come from a check or go to savings, checking or CollegeInvest account, but you can only get it in a lump sum in one place.
This month the left-leaning Bell Policy Center saying the options would help families save and build assets. Moreover, taxpayers already can divide their federal refunds, an option used by hundreds of thousands of Coloradans, according to Bell.
“For most low- to moderate-income families, their tax refund is the largest payment they will receive all year,” Rep. Daniel Kagan, a Democrat from Arapahoe County, told the House Finance Committee last week. “Although tax refunds can help build wealth, many low- to moderate-income families cannot afford to save the entirety of their refund, because of immediate expenses. Allowing families to directly deposit part of their state income fax refund directly into a checking, savings or 529 college savings account would make saving for college easier. encourage overall savings and at the same time help families meet their immediate needs.”
The bill is co-sponsored by 24 of the House’s 34 Democrats, but no Republicans are onboard. Typically anything that returns tax money to taxpayers attracts GOP support. This one might not.
To do this, the state is projected to spend $91,469 the first year, $56,404 the second and $33,751 the third. Some of that money is already in the budget: $24,050 over the three years, according to the fiscal note staff.
Kagan acknowledged Republican opposition on the grounds that people already could save their money anyway they wish after they receive it without additional taxpayer support. He said behavioral economics, however, suggest they do a better job of saving when they can direct the money to a preappointed destination.
The bill should be able to get out of the Democratic-controlled House, but could face a tough path in the Republican-led Senate. When it passed from the House Finance Committee, it got out on a 6-4 party-line vote, with one Republican committee member excused.
“Allowing Colorado working families to directly deposit their state income tax refunds into different accounts, including 529 college savings accounts, is a means to financial security and economic opportunity,” Sen. John Kefalas from Fort Collins, the Senate sponsor, said in a statement. “This is good for families and for Colorado.”
