Hey, guess what I found?
It’s an economic document focused on Colorado!
Whoop! Whoop! Finance Nerd Alert!
The Colorado Legislature’s December 2018 Economic Forecast is out. There’s always plenty of good stuff in there for a finance geek to look at and see both how the Colorado economy is doing, and how the Colorado Legislature is managing it. I’ll dig in here in the next day or two, but here are some interesting tidbits so far.
Marijuana Taxes Aren’t Everything
Despite what the uninformed and misinformed might think, tax collections on marijuana just aren’t that big of a thing compared to the overall budget. If you thought pot taxes would solve all of the governments budgetary needs you were duped, or sorely mistaken.
While December isn’t finished yet, it looks like Colorado’s pot tax revenue will come in at about $250 million. That is real money, but it isn’t difference making making. Colorado’s state budget is $29.9 BILLION. That means the $250 million from marijuana taxes doesn’t even make the budget figure unless you carry out more decimals.
$250 million is just 0.08% of the State of Colorado’s overall budget. In other words, it’s a blip on the radar. It costs more than that just to pave I-25 in the Denver Metro area.
The good news is that for smaller cities and counties, the money actually adds up a bit faster. If your small town budget is just $2 million annually, a new inflow of $300,000 is actually the difference between paving Main Street or not.
TABOR Refunds For 2018
Initial figures show that there were enough tax collections to trigger a TABOR refund for the 2017-2018 Colorado fiscal year. However, the amount is so small (around $130 million for the whole state) that individual taxpayers won’t see any sort of refund on the 2018 taxes they file in early 2019. Instead, the State will reimburse counties for property tax reductions they give to seniors and disabled veterans.
However, if current projections hold, the amount of a TABOR refund for the 2018-2018 FY would be big enough to generate and actual refund on Colorado income taxes for 2019, filed in early 2020.
Not so fun fact: Colorado income taxes are filed in January in order to piggy back off of federal income tax filing. However, Colorado’s own government works off of a July to July fiscal year.
That means that the first part of 2018 was part of “last year” and the second part of 2018 is part of “next year,” so to speak. Or, if you prefer, December is the middle of the 2018-2019 year. Stuff happening right now, economy-wise won’t affect your taxes until Jan-Apr, 2020.
Nobody Knows How the New Tax Law Shakes Out
Like a lot of other states, Colorado bases its income tax on a taxpayer’s federal income tax return. This has two advantages. First, the state doesn’t have to mess with HOW income gets calculated for things like small businesses, dividends, and so on. All the Federal rules apply.
Second, the State doesn’t have to play the enforcement game. Since Colorado income taxes are based on Federal income taxes, the only way to cheat on Colorado taxes (for the majority of taxpayers) is to cheat on your federal taxes. And, if you cheat on your federal taxes, then the IRS (or its computer) will come looking for you. If they catch you, any adjustments they make to your return become adjustments to your Colorado return too.
Boom! Outsourced tax-collection enforcement for free.
However, that also means that Colorado is at the mercy of the U.S. Government when it comes to how taxes are calculated. With the new Trump tax law that is coming online, forecasters really have no idea how some of those big changes in tax law and calculations will affect the overall collection of taxes in the State of Colorado.
Forecast estimates are subject to a higher margin of error than usual
due to recent changes in federal tax law. Unusual shifts in taxpayer behavior occurred as a result of the passage of the federal Tax Cuts and Jobs Act.