The new administration has only been in office for a few months, but Colorado’s newly elected governor Jared Polis has already unveiled an ambitious plan to implement income tax breaks for small businesses and residents statewide. His economic plan, part of his four “Bold” initiatives, will impact residential, small business, and corporate stakeholders in different ways, but it is all anchored in his goal to remain revenue neutral by reducing or eliminating tax breaks for corporations and special interests.
Here’s what this might all mean in Denver South.
Reduced state income tax
Governor Polis wants to reduce the state’s income tax rate of 4.63 percent to 4.3 percent or even lower if possible. He plans to do this by eliminating existing tax loopholes for businesses, although it’s yet to be determined what loopholes exactly are up for debate.
Don’t expect anything to happen around this just yet. After opposition from lawmakers this spring, the state income tax initiative has been tabled for the time being and will have to wait until the next congressional session.
However, if and when these changes do come up again, Denver South residents and small businesses can expect to see more money in their pockets due to the lower tax rate, potentially boosting the local economy.
Limited corporate tax breaks
To pay for these cuts, the administration is looking to dial back some of the tax breaks it offers large corporations.
According to an in-depth report by the Colorado Sun, the state currently offers 208 different corporate tax breaks that amount to a total of $6.6 billion. This includes several big-ticket discounts that aren’t really cuts, but rather ways to prevent unfair double-taxation.
Also, according to the report, it’s unclear exactly how much some of these breaks are actually worth to the state. For example, $1 billion worth of Colorado’s tax break are currently not itemized, and the matter is further complicated by varying reporting requirements.
So, it’s unclear how much of savings this could produce.
Still, Denver South is home to a number of robust and high growth industries, from energy to technology. There are lots of existing industry specific tax breaks and deductions that benefit these industries, for advanced industries, retail, agriculture, aerospace and oil and gas, for example.
However, it’s impossible to identify which industries benefit the most according to current tax breaks, and so it’s impossible to determine which may be most affected by changes. This part is going to be a “wait and see” issue.
The broadest possible benefit
The administration has a hard road ahead. It’s not easy math to find enough loophole money to cover the income tax cuts they’re shooting for, but Gov. Polis seems confident. According to an interview with the Colorado Sun, he says that, when the specifics shake out, his plans is designed to focus “on the broadest possible benefit to the most number of people.”
Also, his commitment to supporting residents and small businesses remains clear. In addition to limiting taxes, Gov. Polis is seeking to encourage employee-owned businesses. He believes this will help promote wage growth and increase economic resilience during less prosperous times.
