Colorado lawmakers advance a new tax credit that could cut child poverty in half

A young child wearing a small backpack walks beside an adult wearing jeans and a grey sweater outside with a green area in the background.
Supporters of the "Family Affordability Tax Credit" bill say it would benefit 45% of Colorado families. (Getty Images)

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A bill supporters say could cut Colorado’s child poverty rate in half by providing new tax credits to low-income families narrowly passed its first legislative hurdle on Monday

House Bill 24-1311 would create the “Family Affordability Tax Credit,” which would be available only in years when the state has enough surplus tax revenue. The idea is that the new credit could be layered on top of the state’s existing child tax credit to provide a larger sum to the lowest-income families and reach a wider swath of Colorado families with children. The new credit would become available next year when Coloradans file their 2024 income taxes.

The lowest income families with children under 6 would be eligible for a $3,200 tax credit under the bill. Families with children ages 6 to 16 and those with incomes up to $95,000 could get smaller credits.

Many Democratic lawmakers and advocates see the bill as a chance to address Colorado’s high cost of living by sending extra money to up to hundreds of thousands of cash-strapped families. They also say it would pick up where the federal government left off when its expanded child tax credit expired in 2021. With action on another child tax credit expansion stalled in Congress, several states have recently expanded or created their own child tax credits.

During Monday’s hearing in the House Finance Committee, some Republicans expressed concerns about the bill’s price tag and the fact that the tax credit would be available only in good economic times, not bad ones.

The new tax credit would cost around $700 million annually in years when state revenue exceeds caps put in place by Colorado’s Taxpayer’s Bill of Rights, or TABOR, a 1992 constitutional amendment that limits the growth of state spending according to population growth and inflation.

This year, the credit would use about 35% of the anticipated $2 billion surplus. In years when the state doesn’t collect surplus tax revenue, the family affordability credit would not be given and in years when the state has some surplus revenue but not enough to fully fund it, the credit would be reduced proportionally.

The tax credit bill passed the House Finance Committee in a 6-5 vote Monday evening, with State Rep. Bob Marshall, Democrat of Douglas County, joining four Republicans in voting no. The bill’s next stop is the House Appropriations Committee.

Marshall, in explaining his no vote, said the bill’s plan to use surplus tax money for the tax credit instead of refunding it to Coloradans shows a “deep contempt” for what voters put in place in 1992.

“We’re trying to find a way around it because we don’t like the fact that we have to give $2 billion back to the taxpayers and we want to direct it where we want,” he said.

A long list of supporters from health, education, and early childhood groups who urged lawmakers to pass the bill during public testimony described the bill as a game-changer that would benefit 45% of Colorado families, helping them cover basic needs and give young children a more stable foundation during a critical time of development.

Several said affording a one-bedroom apartment in Colorado on a minimum-wage job requires 77 hours of work per week.

Moriah Rodriguez, a single mother who grew up in Colorado, said it’s discouraging and stressful to see the cost of living in the state continually rise. She said the new tax credits would help families cover basics and by extension, help children succeed in school.

“I know firsthand that the economic stability in the home is reflected in how the child shows up in the classroom,” she told lawmakers.

When the federal government gave out a more generous child tax credit during the pandemic — a portion of it delivered in monthly allotments — most low-income families spent it on food, utilities, housing, clothing, and education costs, according to the Center on Budget and Policy Priorities.

Census numbers show that the expanded federal child tax credit cut child poverty nearly in half nationwide — from 9.7% in 2020 to 5.2% in 2021. But once the expansion lapsed, the child poverty numbers quickly spiked to previous levels.

Ann Schimke is a senior reporter at Chalkbeat, covering early childhood issues. Contact Ann at aschimke@chalkbeat.org.

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