DENVER—Colorado tax credits used to subsidize the purchase of electric vehicles (EV), heat pumps, and e-bikes are set to be cut in half next year due to declining state revenues and an increasingly bleak economic forecast, according to economists for the state.
Legislative Council Staff senior economist Emily Dohrman told members of the Joint Budget Committee in their quarterly meeting last week that Colorado’s state revenue has declined between March and June. To keep the so-called “green” tax credits available, tax revenue must grow a minimum of 4% by next year. Currently, it is projected to only grow by 2%.
Economic forecast by both Legislative Council Staff and the Office of State Planning and Budgeting (OSPB) suggest declining economic growth in Colorado for the remainder of this year and 2026, with OSPB saying the odds of Colorado slipping into recession increased 40-50% in just the last three months.
Jake Fogleman, director of policy at the Independence Institute (which publishes Complete Colorado) and co-host of the energy podcast PowerGab says the tax credits shouldn’t exist to begin with, as they foster market distortions and take money out of Colorado taxpayers’ pockets.
“Those tax credits should not exist in the first place, so any reduction in their availability is good news,” Fogleman told Complete Colorado. “They are unnecessary and, in many cases, highly regressive, placing a government thumb on the scale in favor of certain products over their less expensive competitors, while forcing taxpayers to foot the bill.”
The tax credits, which reduce state revenues, are paid for out of overcollected tax dollars that would otherwise be refunded back to Coloradans under the the Taxpayer’s Bill of Rights, or TABOR amendment.
For 2026, tax credits for e-bikes will go from $500 to $250, heat pumps ranging from $250-$2,000 will be cut to $125-$1,000, and electric cars and trucks will go from $1,500-$8,000 to $750-$4,000.
Fogleman continued that lawmakers have no one to blame but themselves, having had a hand in digging Colorado’s current economic hole.
“It is the height of irony that the availability of these subsidies is falling victim to Colorado’s diminishing economic dynamism when the very same lawmakers that passed them also had a hand in contributing to the state’s ongoing malaise through deliberate policy choices.”