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Colorado expects less revenue, halts some tax credits

Elyse Apel

(The Center Square)

Colorado is pulling back on certain tax credits as the state anticipates a drop in revenue this fiscal year.

This is according to findings in December’s Economic Forecast, which was recently presented by the Governor’s Office of State Planning and Budgeting to the Legislature's Joint Budget Committee.

That forecast found that, in fiscal year 2025-2026, revenue is expected to drop below the state-mandated Taxpayer’s Bill of Rights cap.

Analog alarm clock flanked by a stack of wooden blocks with the word "tax" and a small house figurine.

This will have a tangible impact on Coloradans. It means they will no longer receive refund checks from TABOR, which normally returns tax surpluses to the state’s citizens.

Colorado Governor Jared Polis, a Democrat, is pointing the blame at Republicans.

“The White House’s destructive trade wars continue to hurt our economy, skyrocket costs, and worsen inflation,” he said. “Despite this, we are maintaining a healthy reserve to secure Colorado’s fiscal future.”

The drop in revenue was largely fueled by the One Big Beautiful Bill Act, which Congress passed July 1.

Since then, Colorado lawmakers have spent the last few months scrambling to address what the state has labeled an “unexpected and unnecessary shortfall” of $800 million. Steps included everything from budget cuts to hiring freezes.

Now, the state also cut tax credits. Colorado’s Family Affordability Tax Credit and the Earned Income Tax Credit expansion have both been turned off for tax year 2026, which Coloradans file for in early 2027.

The state said this was due to “lower revenue growth,” meaning the credits should likely return in future tax years, when TABOR surpluses are once again expected.

Over the coming years, the state anticipates revenue once again increasing. Specifically, the forecast anticipates: