This story was first published at Colorado Newsline.
DENVER | The first handful of bills from the special legislative session have landed on Gov. Jared Polis’ desk after winning final approval from lawmakers over the weekend and on Monday morning.
The Legislature began its special session last Thursday to pass revenue-raising policies to help fill an approximately $750 million gap in the state’s budget. That hole follows the passage of the federal tax cut and spending law in July, which hit Colorado’s project tax revenue for the current fiscal year and years to come.
Democrats’ plan to rebalance the budget includes the policies passed this session to raise more tax revenue, a dip into the state’s reserve funds and a spending cut plan that the governor is scheduled to present to lawmakers later this week.
Republicans railed against the Democrat-backed bills that they see as detrimental to the state’s business community and in violation of the Taxpayer’s Bill of Rights, which mandates voter approval for tax increases. They want the state to cut expenses rather than find ways to raise more money.
“Why are we here talking about raising taxes on businesses, mortgaging future revenue, instead of talking about addressing the real issue? I don’t know,” Sen. Lisa Frizell, a Castle Rock Republican, said on the Senate floor Monday morning. “We are continuing to punish the businesses in this state.”
The five bills focused on raising revenue would raise about $250 million in the current fiscal year by eliminating tax breaks at the state level and letting companies pre-pay taxes at a discount. Four of them were passed by the Senate on mostly party-line votes on Sunday evening and Monday morning.
House Bill 25B-1005 would repeal a provision in state law that allows retailers to keep 4% of their sales tax collections, sometimes referred to as a vendor fee, as a way for the businesses to cover the cost of collecting the taxes.
The bill’s fiscal note estimates it would raise $28 million in revenue for the state in the current fiscal year, and $57 million the next year.
Sen. Cathy Kipp, a Fort Collins Democrat, said the tax incentive is outdated, and cutting it is necessary amid the state budget hole. Kipp also pointed to how tax code changes in the federal Republican domestic policy law primarily benefit businesses.
“Nobody wants to give up something they’ve already had, and nobody wants to be for asking people to do that,” said Sen. Cathy Kipp, a Fort Collins Democrat. “It’s just that this is where we find ourselves today. But we do not genuinely pay people to pay their taxes. We do not generally pay people to comply with the law.”
Sen. Lynda Zamora Wilson, an El Paso County Republican, spoke against the bill during its final debate on Monday morning, and so did several of her Republican colleagues.
“We should be incentivizing businesses, this is the time,” Zamora Wilson said. “We’ve got to make cuts. I’ll say it again and again.”
Five Democratic senators sided with Republicans in voting against it.
The Senate then passed House Bill 25B-1003. This would repeal a tax incentive for insurance companies that have at least 2.5% of their domestic employees in Colorado. The bill would raise $44 million for the state in the current fiscal year and $91 million the following year.
Finally, senators signed off on House Bill 25B-1001. This would permanently extend a requirement that high-income taxpayers who own sole proprietorships, S corporations or partnerships add back their qualified business income federal tax deductions when calculating their Colorado taxable income. It will only impact single filers who make at least $500,000 and joint filers who make at least $1 million, so business owners who earn less than that still will benefit from the deduction at the federal and state levels.
Congress made the federal deduction, which can be up to 20% of that “pass-through” income for business owners, permanent with its recent law. Colorado decoupled from the federal deduction for high earners in 2020.
The bill’s fiscal note estimates it would raise about $46 million in the current fiscal year and about $95 million in the next one.
On Sunday, the Senate passed House Bill 25B-1002. This bill would expand the list of countries that the state considers to be tax havens, which limits the deductions that corporations can claim on taxable income in those jurisdictions. The bill would bring in an estimated $36 million in state tax revenue for the current fiscal year, according to its fiscal note.
The bill’s Democrat sponsors have argued that the bill closes corporate tax loopholes during a time when the state budget is hurting. But Senate Republicans were wary that the bill could hurt businesses.
The Colorado Legislature sent four other bills to Gov. Polis’ desk over the weekend.
The Senate signed off on amendments made in the House to a bill to redirect a small amount of money from the state’s wolf reintroduction program to the health insurance affordability fund.
Senate Bill 25B-3 would change a referred ballot measure in November to ask voters if the state can use extra money collected for universal school meals to also cover costs related to the Supplemental Nutrition Assistance Program.
Senate Bill 25B-2 would allow the state to pay for Medicaid services from organizations that provide reproductive health care, namely Planned Parenthood, that the federal government has withheld Medicaid money from. The bill’s fiscal notes estimates it would cost Colorado a maximum of $4.4 million during the current fiscal year, which began on July 1.
Senate Bill 25B-1 would set a process for the governor to notify and consult with the Joint Budget Committee on mid-year spending cuts needed to overcome a revenue shortfall, like the ones he is poised to do soon after this special session. The governor would be able to suspend and cut state funding, and therefore need to meet with the JBC, if the reserve needs to be tapped by up to 3% of the General Fund budget, or if that reserve is projected to dip below $1 billion.
I don’t know why the MAGA GOP faction is fixated on cutting ONLY spending ALL of the time. We, as a state, have our priorities. We want to assist people with the full range of health care, especially maternal healthcare at this time of national distress to maternal healthcare systems. We also want to help feed our children. The only way we can reasonably do that in light of the cuts at the national level is to raise taxes on those who will have the resources to do so after the so-called “Big Beautiful Bill” gives tax breaks to the same corporations Democrats earmarked for state tax increases. It allows the state to be true to its priorities. Tax increases are not the only tool being used by the fiscally responsible Democrats. Reserves and spending cuts are yet to come. I worked with budgets all of my life. A party can’t worry constantly about one side of the budget, always cutting spending while we grow and new priorities become apparent. We must address nascent issues!
I can’t count the number of times I’ve heard the left-leaning media say that companies don’t pay for tariffs – people do! I wonder why they never point out another truism – companies don’t pay tax hikes – people do, when they pass their cost increases onto consumers of their products and services. Democrats know that tax increases are unpopular, so they try to hide them by raising taxes on those “mean evil big greedy” corporations and companies.
Tax and spend. Tax and spend. No cuts, just new taxes. Disgusting