Colorado Democrats unveiled a suite of bills Tuesday that aim to divorce the state tax code from recent federal changes — generating extra state revenue that would be used to provide at least some money to low and middle-income families with children.
The legislative package sponsored by a dozen lawmakers would repeal a variety of state tax exemptions that mirror tax breaks in the federal code. It puts a particular focus on splitting the state tax code from changes made by the tax cut bill passed last year by Congress and championed by President Donald Trump.
The targeted cuts would include a cap on how much corporations can write off from operating losses, how much depreciation businesses can write off for things like buildings and equipment, and how much interest a business can deduct from its taxes. Filers who use those tax breaks would no longer get the full benefit for state tax purposes.
The new bills build off state Democrats’ work during last summer’s special session to close a slew of tax exemptions and update the state tax code in response to H.R. 1. That is commonly known as Trump’s “big beautiful bill.”
Lawmakers hope to use the money the state pockets from ending the exemptions to extend or expand some state tax credits, such as those for rehabbing mostly vacant buildings in enterprise zones and for wildfire mitigation. Supporters also hope to steer some of the money to recipients of the state’s new — and on the ropes — Family Affordability Tax Credit, or the FATC.
That new program has given direct payments to low- and middle-income families to help with child-rearing costs, starting with the tax-filing season a year ago. Researchers credited the program with helping to cut Colorado’s child poverty by more than a third last year.
“Seldom have we seen any piece of tax policy be that effective, that quickly,” Sen. Mike Weissman, an Aurora Democrat sponsoring some of the proposals, said at a news conference. “That has been our North Star in assembling this whole package.”
During the event, supporters framed the reforms as shifting tax cuts away from wealthy corporations and toward everyday Coloradans who could use the help to pay for car repairs or for clothes or extracurricular activities for their children.
But in the business community, people worry about the proposals hamstringing Colorado’s competitiveness with other states, Colorado Chamber of Commerce President and CEO Loren Furman said Tuesday. The chamber hasn’t taken a formal position yet, but Furman said it has “deep concerns” about the overall package.
“Together, these proposals shift the burden of Colorado’s budget shortfall on the backs of employers of all sizes via procedural changes to the tax code, reviving several problematic concepts from bills that we’ve repeatedly fought, negotiated or killed in prior years,” Furman said in a statement. “At the end of the day, these bills will increase taxes on businesses at a time when Colorado’s competitiveness rankings continue to decline, further driving companies and families out of the state due to sky-high costs.”
The changes to the federal tax code last summer plunged Colorado’s tax collections below a threshold that would allow for the family tax credit in the current fiscal year, meaning parents won’t receive the money when they file their taxes in 2027.
The tax package proposed Tuesday wouldn’t funnel money directly into that credit, but it would create a new Family Affordability Credit mirroring .
The current family credit gives money directly to joint filers with incomes below $96,000 or single filers with incomes below $85,000. The credit provides more money to lower-income families and those with younger children, and then scales the credit down as the incomes and ages of tax filers rise.
Rep. Yara Zokaie, a Fort Collins Democrat, said it is “crucial” to pass the tax reform package this year because of how effective the FATC has been.
“The progress we made is not something I’m willing to walk back,” Zokaie said in an interview previewing the package.
Three of the four bills were introduced Tuesday afternoon as House Bills , and . A nonpartisan fiscal analysis showing their effect on state tax collections and spending was not yet available.
In addition to Zokaie and Weissman, the bills are being sponsored by Democratic Reps. Andrew Boesenecker, Kyle Brown, Lorena Garcia, Karen McCormick, Emily Sirota and Steven Woodrow, plus Sens. Judy Amabile, Matt Ball, Cathy Kipp, Dylan Roberts and Katie Wallace.
The party has a nearly 2-to-1 majority in the Capitol. But Gov. Jared Polis, also a Democrat, said in an interview at the start of the legislative session in January that he’d want broad-based tax cuts as part of any tax package. He won an income tax cut as part of negotiations to pass the original FATC bill in 2024.
This year, however, Garcia said that “never in a million years” would she consider a broad-based tax cut when the caucus’s goal is direct support to working families.
“At the end of the day, the governor is going to see that this is absolutely necessary,” said Garcia, from Adams County. “He’s trying to say that he wants to put money back in the hands of hardworking families. This is how we do it.”
But Denver Metro Chamber of Commerce President and CEO J. J. Ament echoed Furman’s concerns about the package. The proposals would particularly hurt small businesses, he said.
“You simply cannot make things more expensive and more affordable at the same time,” Ament said in a statement. “The legislature would be better served by focusing on increasing Colorado’s competitiveness and attractiveness for business investment and great jobs.”
The new package is part of a broader push on the left to remake Colorado’s tax system. The state has long been governed by the Taxpayer’s Bill of Rights, or TABOR, which mandates a flat income tax and caps state revenue collection.
The Colorado Education Association is backing a proposed ballot measure that would exempt education spending from the cap — in effect, giving the state an additional buffer of billions of dollars before it would have to refund money to taxpayers. It would earmark some of the cash for education. Sen. Jeff Bridges, a Greenwood Village Democrat, is planning to introduce a bill to refer that measure to the ballot.
The progressive Bell Policy Center recently won preliminary approval to solicit signatures through the initiative process for another measure that would institute a graduated income tax, in which wealthier Coloradans would pay a higher percentage of their incomes in taxes.
The proposals wouldn’t necessarily compete with each other, but they would upend the foundation of Colorado’s tax code.
For one, the education proposal would, in effect, erase the state’s TABOR surplus, or the money collected over the revenue cap. That money is generally used to pay for a slew of Colorado tax credits, including the FATC, before issuing general taxpayer refunds.
The tax package unveiled Tuesday would sidestep that issue by dedicating money from the closed write-offs and other exemptions to fund the new, similar-but-separate Family Affordability Credit.
