By Debi Brazzale, COLORADO NEWS AGENCY
Lawmakers are poised to begin looking at rolling back tax exemptions and credits that Colorado businesses say they rely on to recover from a devastating recession but that state officials say they must cut off to balance the budget.
Faced with a $1.3 billion budget shortfall amid revenue projections that indicate a much slower-than-anticipated recovery, Gov. Bill Ritter has proposed a laundry list of 13 tax credits and exemptions to eliminate either temporarily or permanently. Ritter’s plan would bring state coffers another $131.8 million.
Business groups and their membership, who have been urging the governor to reconsider his proposal, will now be focused on state lawmakers, who will start deliberations on the measures tomorrow. That’s when the House Appropriations committee is scheduled to take up House Bills 1189 through 1200, comprising the administration’s proposed changes.
Sen. Linda Newell, D-Denver, who has roots in the business community, says she will be looking at each measure carefully with an eye toward how businesses will be affected, and she said she plans on talking with the business community before she makes any decisions on how to vote on the measures . Newell says the exemptions need to be re-evaluated to bolster sagging revenues for the state.
“We need more revenue at the state level, and if that means that we need to close some of those loopholes then, yes, that’s a better mechanism than it would be to go back out for a vote of the people (for a broader tax hike),” said Newell.
The state constitution’s Taxpayer’s Bill of Rights requires a popular vote on any tax hike, but the Colorado Supreme Court ruled last year that eliminating tax credits and exemptions, boosting state revenue, would not require a vote if the result didn’t raise the state’s year-on-year revenue overall. Looking at temporary rather then permanent revisions appeals to Newell because she thinks businesses would be more willing to accept it.
Loren Furman, of the Colorado Association of Commerce and Industry says that the Colorado business community has spoken and that they believe the repeals will take away jobs.
“Repealing these tax exemptions and credits will absolutely impact jobs in Colorado and businesses have said as much,’” said Furman, pointing to a new survey of CACI members, who unequivocally said they are against the proposed measures.
Rep. Bob Gardner, R-Colorado Springs, thinks that repealing the tax exemptions is not only bad for business but also a slap at Colorado’s constitution. Gardner said the legislature has no right to pass the measures without a vote of the people despite the state Supreme Court’s ruling.
“The fact of the matter is that it’s a new kind of tax,” he said. “It is a new tax that ought to go to the people of Colorado. In fact, all of these tax exemptions that are going to be heard on Wednesday ought to be considered by the people of Colorado.”
Of particular concern to Gardner is the repeal on the exemption for computer software that is procured by businesses through the Internet. Under the Colorado Department of Revenue, non-tangible personal property is not taxed and what has been deemed as tangible personal property is subject to taxation.
“It’s not really an exemption,” Gardner said. “Under our tax code, intangibles such as software have never been taxed. One of these bills would define, for the first time, software as tangible personal property.”
Gardner added, “It is going to affect our business climate. It is going to be to the detriment of jobs.”
Tony Gagliardi of the National Federation of Small Businesses, says the state cannot create jobs when it enacts policies that raise the cost of employment.
“Every time we turn around, the state is coming up with onetime fixes that impact us,” said Gagliardi. “We’re to the point where there’s just no more to give up.”
