January 13, 2015


State & Local Taxes in 2015


Colorado Tax Code Features

Progressive Features

• Comparatively large standard deduction and personal exemption

• Standard deduction and personal exemption indexed to inflation

• State sales tax base excludes groceries

• Requires the use of combined reporting for the corporate income tax

Regressive Features

• Personal income tax uses a flat rate

• Local sales tax bases include groceries

• Fails to provide a refundable Earned Income Tax Credit (EITC): one may eventually take effect if revenue triggers are reached

• Fails to provide a property tax “circuit breaker” credit for low-income non-elderly taxpayers

Tax Changes Enacted in 2013 & 2014

• Dependent care tax credit made refundable for families earning less than $25,000

• Enacted legislation that would create a permanent Earned Income Tax Credit (EITC) dependent on revenue growth

• Enacted legislation that could create a permanent Child Tax Credit (CTC) if the federal government allows states to enforce sales tax collection laws on e-retailers

ITEP Tax Inequality Index

According to ITEP’s Tax Inequality Index, Colorado has the 32nd most unfair state and local tax system in the country. States with regressive tax structures have negative tax inequality indexes, meaning that incomes are less equal in those states after state and local taxes than before (See Ap­pendix B for state-by-state rankings and more details).

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