Expansion of the Earned Income Tax Credit is proposed in a bill by Colorado Democrats.
Earned Income Tax Credit is planned to be expanded in a new bill proposed by Colorado Democrats. (Photo: IRS)
Earned Income Tax Credit’s Expansion
During a special session, Colorado Democrats have proposed a bill in regards with Earned Income Tax Credit that would provide nearly $200 million in tax benefits to over 400,000 lower-income taxpayers in the state. The bill aims to expand the state’s Earned Income Tax Credit, potentially giving eligible households hundreds or even thousands of additional dollars.
However, this change of the Earned Income Tax Credit would also decrease the size of the TABOR refund payments for all taxpayers by about $50 each. The proposal about the expansion of the Earned Income Tax Credit is part of the special session focused on property taxes but includes policies to support lower-income individuals who are less likely to own homes.
The state currently matches a quarter of the federal Earned Income Tax Credit, but under the new bill, it would increase to 50% for the current tax year. The cost of the expanded income tax credit would come from the expected $3.5 billion TABOR surplus in the form of refunds.
According to a published article by Colorado Public Radio, Republicans have criticized the bill about the Earned Income Tax Credit. This is the second proposed change to TABOR refunds in the special session, with Democrats also suggesting “flat refunds” that pay the same amount to all taxpayers regardless of their income and tax burden.
Ultimately, households earning less than $104,000 would receive larger refunds under the Earned Income Tax Credit expansion bill.
Colorado House Of Representatives
In a published article by The Colorado Sun, the Colorado House of Representatives has passed a measure to double a state tax credit for low-income working families for one year, redirecting $185 million that would have been refunded under the Taxpayer’s Bill of Rights.
This move is part of Democrats’ efforts to redistribute tax breaks from higher earners to those in financial need. The proposal reflects a shift towards progressive priorities after the failure of a property tax measure that progressives felt favored wealthy homeowners. Republicans, on the other hand, believe taxpayer refunds should be left untouched.
The measure also expands the Earned Income Tax Credit, providing significant tax breaks for low-income individuals. The bill will now go to the state Senate for consideration, and the House has also approved a separate measure to provide $30 million in rental assistance for households facing eviction.
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