Though Colorado is required by statute to refund surplus revenue to taxpayers–a process that disproportionately benefits the wealthy–advocates in the state’s Growing Our Future coalition have successfully leveraged that policy into a new tax credit designed to address child poverty. The Family Affordability Tax Credit will put more money into the hands of families and help cut the child poverty rate in Colorado in half.
Tax policy can have a profound impact on family well-being. Take the expanded federal Child Tax Credit in the American Rescue Plan Act, which, though temporary, cut child poverty in half after the COVID-19 pandemic. In Colorado, lawmakers took a step forward last year by enacting the Family Affordability Tax Credit (FATC) and a tax credit for members of the care workforce. While these measures represent meaningful progress, Colorado continues to grapple with a long-standing obstacle. The Taxpayer’s Bill of Rights (TABOR) has constrained state finances for over three decades, limiting the ability to invest in families. Now, advocates are determined to change the status quo and are pushing for a fairer tax system that truly supports families.
Enacted in 1992 as a constitutional amendment, TABOR is considered one of the most restrictive tax policies in the country.
It prevents the state legislature from raising taxes without voter approval, caps state spending increases, and prohibits graduated income tax, real estate transfer taxes, and many other alternative tax provisions. Chris deGruy Kennedy, a former state legislator who sponsored the FATC bill and now serves as President oft the Bell Policy Center, said that TABOR has “had the practical effect of shrinking the size of the state government relative to the economy year over year.” Efforts to reform TABOR have surfaced over the years, but its core restrictions remain intact and continue to hinder the state’s ability to invest in families and communities. Despite strong economic growth, Colorado effectively cut $1.2 billion from its FY25-26 budget. (Read more about the cuts made in the 2025 session here).
However, there is a key exception. Any surplus revenue above the state’s spending cap must be returned to taxpayers. While this is most commonly done through annual “TABOR refunds,” lawmakers can also issue tax credits or deductions. Family tax credits are not considered a state expenditure under TABOR, which opens the door for innovative tax policies that support Colorado families without violating TABOR constraints.
The FATC emerged in early 2024 when it became clear that state revenues would exceed the TABOR limit. Unlike other states that could use budget surpluses to invest in Medicaid, education, or child care, Colorado was limited to issuing refunds or adopting tax credits. The Growing Our Future Coalition, a network of early childhood advocates supported by a Child Care NEXT grant from the Alliance for Early Success, saw an opportunity. Instead of letting hundreds of millions of dollars go back to taxpayers in refunds that disproportionately benefit the wealthy, Growing Our Future advocated for a policy that would redirect those funds to low- and middle-income families with children. Notably, advocates chose to create a new tax credit rather than expand Colorado’s existing Child Tax Credit. The goal was to design a larger, flexible credit that would be tied to state revenues, one that could respond dynamically to economic conditions while keeping the existing credit as a permanent baseline of support.
The Bell Policy Center, a nonpartisan organization focused on economic mobility, played a central role in advancing the FATC alongside partners such as Gary Community Ventures, the Women’s Foundation of Colorado, the Colorado Statewide Parent Coalition, and the Colorado Children’s Campaign, all of which were part of the Growing Our Future Coalition. “It ended up being a remarkable collaboration and division of labor. We all had our parts to play on this team. My part was primarily doing the inside-the-capitol maneuvering work and the negotiations with the Governor’s office, but we had a number of key partners,” said deGruy Kennedy. He notes that there was a weekly meeting for the core group to share updates from both inside and outside the capitol, as well as a larger weekly meeting that included tax policy experts, child advocates, and representatives from over 30 organizations. This tight collaboration meant that when it came time for legislative hearings, advocates were prepared, unified, and compelling in their testimony. Ultimately, this led to the successful passage of these bills.
Experts project that, when combined with Colorado’s expanded Earned Income Tax Credit and existing Child Tax Credit, the FATC could cut the state’s child poverty rate nearly in half, potentially resulting in Colorado having the lowest child poverty rate in the nation. Reducing child poverty not only improves immediate well-being but can also change the trajectory of a child’s life by closing opportunity gaps and improving lifelong economic mobility.
The tax credit for care workers is also critical to supporting essential workers, whose chronically low wages make it difficult for them to care for their own families. In fact, over 40 percent of direct care workers in Colorado rely on public assistance. Economic instability among care workers not only impacts their own families, but the broader child care system as a whole, as it can lead to higher rates of turnover and stress that impact accessibility and quality of care. While this tax credit alone will not fix the systemic compensation issues in care work, it is a pivotal first step.
Advocates are not stopping here. The Growing Our Future coalition and Gary Community Ventures have turned their sights on collecting data to build the case for continuing and expanding these tax credits. They are also eyeing potential new state revenue resources to support families and are organizing a working group to chart Colorado’s next steps. The long-term vision is still evolving, but the drive to remove the hurdles that have long constrained progress in the state remains strong.
“Child Care NEXT grants were designed to help states push for transformative policies and build a durable political and funding base, so that progress is sustainable. In Colorado, the Growing Our Future Coalition is doing just that,” said Jacy Montoya Price, Senior Director of Advocacy and Issue Campaigns at the Alliance for Early Success. “Our grantees already have impressive wins under their belt, and I am encouraged to see the continued hunger for bold, long-lasting policy change. While other states have a much different tax structure and landscape, we can all learn from this approach. Even under the tightest financial constraints, it is possible to support families and care workers, reduce inequality, and strengthen communities.”