The tax reform bill passed by the Republican-led Congress this week will put money in the pockets of most Americans and cost the federal government money.
The state government in Colorado expects the exact opposite result: an increase in state income taxes that will add roughly $305 million to spend in next year's state budget.
“That's a lot of money,” said Henry Sobanet, who's in charge of overseeing Colorado's multi-billion dollar annual budget.
Most Coloradans will still save money on balance because the increase in state tax is smaller than the federal tax cut.
For example, a married Colorado couple making $75,000 with two kids would get save $2,118 on their federal taxes but pay $259 more to the state. In this example (which relies on the standard deduction), the couple still saves $1,859 in the end.
Why?
“Well, line 43, for the people who do their own taxes, is the number that gets sent over to the state tax form,” Sobanet said.
He's talking about “taxable income” as listed on your federal tax return. The state simply charges a flat income tax of 4.63 percent on this number.
And under the GOP tax plan, this number generally goes up. The federal bill decreased tax rates to lower peoples' tax bills, but it also eliminated exemptions that reduce peoples' taxable incomes.
For the example above, the GOP tax bill increases federally taxable income from $45,400 to $51,000.
This would all appear to be good news for the people who decide how to spend your state tax dollars. An extra $300 million can go a long way toward helping the different priorities lawmakers have.
Yeah, not really.
“I think sometimes there's more fighting when there's more money,” Sobanet said.
Republicans are calling for all of the money to go toward roads.
Democrats would prefer to spend the new funds on education.
And Gov. John Hickenlooper (D-Colorado) is wedging himself in the middle, signaling he'd like to spend some of the money on both.
