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Politics and Government

Jared Polis won’t get one top priority this session: his income tax cut

The Democratic governor remains committed to the idea but says he needs time to work on it “over the next year”

Colorado Gov. Jared Polis prepares to head to his new office before his inauguration at the Colorado Capitol on Jan. 8, 2019. (AAron Ontiveroz/The Denver Post/Pool)
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Colorado Gov. Jared Polis made a state income tax cut one of his top priorities in his first year.

He won’t get it. The opposition from Democratic lawmakers and his allies and the complicated nature of the policy shift led to the proposal’s demise before it could be introduced in the current legislative session.

The first-year governor wants to reduce the state’s income tax rate to 4.3 percent or 4.2 percent from 4.63 percent  — “or as low as we can get” — by eliminating existing tax loopholes for businesses. But now he acknowledges it won’t happen before the session ends May 3.

“It’s a lot of moving parts, so we are very much in the research and planning stages of putting together what that would look like,” Polis said in an interview with The Colorado Sun.

In recent remarks to small business owners, he pledged to work on it “over the next year.”

“We pay too much because special interests get too much in tax breaks,” Polis told the National Federation of Independent Business. “We effectively subsidize big business at the expense of small business.”

In his first days in office, Polis elevated the issue from campaign promise to priority — ranking it at the top of his administration’s agenda along with full-day kindergarten and health care reform.

But it faced early opposition from Democrats and liberal fiscal organizations who feared it would most benefit the wealthy, worsen income inequality and reduce money for state programs that help lower-income residents.

Earlier this year, a state Senate committee rejected an even smaller 3 percent reduction in the income tax rate proposed by Republican lawmakers.

The details remain vague, and Polis has suggested cuts of different sizes. But his main plan would amount to a 7 percent to 9 percent cut in the state’s income tax rate, or approximately $810 million. To offset the loss in tax revenue, Polis proposed eliminating some of the state’s current tax breaks, which amounted to $6.6 billion in the latest numbers, to keep it revenue neutral.

It’s a tall order, an analysis by The Sun found, because many of the current tax breaks are popular and benefit a broad swath of the state.

The administration later told The Sun that its top targets include the $400 billion federal tax cut for pass-through businesses signed by President Donald Trump and capping the amount of sales tax major retailers can keep to cover the cost of compliance.

But one of the major supporters of the Trump tax break is the NFIB. The organization’s state director said it benefits about 86 percent of the organization’s members.

At the NFIB event Thursday, Polis said “we are very excited to be going through (the tax breaks) with a fine-tooth comb,” but said the final list that he would eliminate remains uncertain.

“It’s a big complicated thing because there are thousands of provisions of law, so the work is not yet done,” he said after the event.

Correspondent Brian Eason contributed to this report.

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