Category — Taxes & Fees
Et tu CDE? Et tu O’Brien?
May 12th, 2010 — Budget, Education, Politics, Taxes & Fees
Our official, state web page is pretty bland and not very informative. A few years ago I asked if I could substitute this site, or at least link to it. "No," was the answer. The state pays for the official page and state money can't support anything political or partisan.
I single out Democrats for an obvious reason; to vote for Senate Bill 10-191 – aka the teacher evaluation and tenure bill – means bucking the Colorado Education Association, the most powerful education interest group in the state. The CEA is pulling out all the stops – including fear-mongering, arm-twisting and fact-twisting – to defeat this bill.The organization obviously views SB 10-191 as an existential threat; not to teachers but to itself. Why? Because if SB 10-191 becomes law, it means the CEA failed to muster the political force to stop it, despite having both houses of the legislature and the governorship in the hands of the Democratic Party, CEA’s longtime soulmate.
Perhaps CEA should strive to be more honest, or at least to do its homework by reading this thorough and careful analysis from the Tax Foundation (H/T Free Colorado). Among other things, the analysis shows that Amazon taxes:
- Are “unlikely to produce revenue in the near-term”
- Make the playing field less (not more) level between brick-and-mortar businesses and their Internet-based counterparts “because they require Internet-based businesses to track thousands of sales tax bases and rates while brick-and-mortar businesses need to track only one”
- “Undermine legal certainty, burden interstate commerce, and harm economic growth”
So maybe CEA is ignorant of tax policy and chose to accept the official fiscal note that claimed Colorado’s Amazon Tax (aka HB 1193) would raise nearly $5 million more state revenue per year. Or maybe CEA is just trying to provide cover for its allies in the legislative majority at the State Capitol.CEA’s choice in supporting tax policies conveniently appears less dependent on how the policies affect school funding than on how they affect the interests of its Left-leaning political coalition.
May 12, 2010 No Comments
Senate update on tax break accountability bill
May 8th, 2010 — Bills, Taxes & Fees
In the Senate, accountability doesn't extend to us or businesses that get tax breaks and subsidies. The Senate on Friday killed a bill that would have taken the first step toward verifying whether our supposedly job-creating incentives actually create any jobs.
No surprise really. The Governor and the so-called business committee hated the bill. They, along with some House members went so far as to call it anti-business.
May 8, 2010 No Comments
Even asking is anti-job
April 28th, 2010 — Bills, Labor, Taxes & Fees
The anti-job attacks have hit a new level of absurdity. Now, even asking if a job-creation plan actually creates any jobs has become anti-job. Seriously.
We were considering a bill (HB10-1350) today that asks the Colorado Economic Development Commission to come up with a plan for determining if our supposedly job-creating subsidies and tax breaks really create jobs. Yes, that's asking the foxes to report on their success in guarding the hen house (more on that after the break), but even that was too much for the Governor and the Republicans.
While the Governor's crew and the chamber of commerce lobbyists were frantically trying to kill the bill from the lobby, Republicans on the House floor were calling the proposal anti-business and anti-job.
It wasn't clear from their comments if requiring job incentives to create jobs is anti-job, or if just asking if they create jobs is anti-job, but, does it matter?
Another argument against the bill was that it would send the wrong message to business. Really? What message would it send? That when he hand over money to businesses so they'll create jobs, we expect them to create jobs with it? That seems like the right message.
I think the wrong message would be that we're handing out subsidies and tax breaks and don't care if they create jobs or not.
Keep in mind that we hand over hundreds of millions of dollars worth of tax breaks every year in the name of creating jobs. Those tax breaks are why we have to cut school funding, raise tuition at colleges and universities and suspend the senior property tax exemption.
With those kinds of consequences, asking if we're getting our money's worth seems like a good idea.
The most discouraging part of the debate was that the Governor and the business lobby had already gutted the bill.
April 28, 2010 2 Comments
Helping businesses that care about Colorado
April 13th, 2010 — Sustainable, Taxes & Fees
While we hand out big tax breaks to big businesses so they can become too big to fail, there are small businesses struggling to survive in the towns where they started. These businesses rarely get tax breaks; they pay the taxes that support our schools and our communities.
Nationwide, they're banding together as the American Independent Business Alliance. The alliance has a plan. It's called "Legislative Platform to Strengthen America's Independent Businesses." Here are some excerpts:
Independent businesses have long been the backbone of the American economy and way of life. They play a critical role in:
keeping the American Dream alive. For generations, starting a small business has been a key means by which families have pulled themselves out of low-wage jobs and into the middle class.
building strong communities. Studies show that small businesses contribute more of their revenue to charitable causes than big businesses.
countering sprawl, reducing traffic, and protecting open space. Local businesses favor locations in downtowns and neighborhood business districts. These compact areas are less costly in terms of public infrastructure and services, compared to sprawling, auto-oriented shopping centers, the development of which can precipitate a rise in local tax rates.
strengthening local economies. Local businesses re-spend a much larger share of their revenue within the local economy compared to national chains, creating more jobs and opportunities.
protecting consumer interests. A marketplace of tens of thousands of independent businesses is the best way to ensure innovation, broad product choices, and low prices over the long-term.
ensuring long-term economic stability. Communities with economies composed of many small businesses focused primarily on serving local needs are more diversified and stable than those dependent on a few large firms, and less vulnerable to distant economic forces.
Yet, despite their importance, independent businesses are rapidly disappearing as fewer and larger corporations increasingly dominate almost every sector of the economy. Contrary to conventional wisdom, the demise of independent businesses is not the inevitable result of market forces and consumer choices. Public policy at all levels of government has played a major role in fueling the growth of large corporations at the expense of America's independent small businesses.
To level the playing field and allow small businesses to originate and flourish, we advocate the following policies (scroll down for federal, state, and local policies):
April 13, 2010 No Comments
Tax Pervasion
January 31st, 2010 — Bills, Budget, Taxes & Fees
We've been trying to suspend or eliminate some tax breaks to help balance the state budget. The so-called "business community" is fighting tooth and nail to keep them. I say "so-called" because I don't think groups like the Denver Metro Chamber of Commerce and the Colorado Association of Commerce and Industry really represent the interests of all businesses.
In any case, the people who have come to testify against the bills have kept to a couple of common themes: cutting the tax breaks will eliminate jobs and cause companies to move out of state.
One business owner testified in committee that if he lost a special tax break for companies that sell software, he'd move his business to Utah. He's headquartered in Colorado, but has another office in Salt Lake City.
I said: "Utah already taxes software sales, why would you move?"
"Why not?" was his answer.
He got a laugh from other people who'd come to testify against the bill, and let it go. It still doesn't make sense. If we eliminate the special tax break Colorado's had since 2005, we'll collect the regular 2.9% state sales tax on certain kinds of software. Utah charges 4.7%. Maybe he'd move, and pay higher taxes, just for spite.
The fact is, Colorado's state sales tax, 2.9%, is the lowest of any state that has a sales tax. A few states don't tax sales, but they raise revenue other ways.
When Coke and Pepsi testify that charging our 2.9% tax on soda will ruin their businesses and cost jobs, they're ignoring the fact that a lot of states charge higher taxes on soft drinks, and people still buy them.
The same is true of our corporate income tax. It's a flat 4.63%. Here's how it compares to other states:
Colorado's not on that chart because I had to split it in half to include all of the states. Here are the rest:
Yeah, that's Colorado over on the right. We're the lowest of any state that has a corporate income tax. I left off the states that don't have a corporate tax. I also left off Ohio, which has one, but it's unique and hard to compare.
The non-partisan Tax Foundation ranks us 13th in lowest state and local taxes for businesses. One, two and three are South Dakota, Wyoming and Alaska. When you throw in quality of life, Colorado's pretty competitive.
The problem with complaining about taxes in Colorado is the tax in every other state.
January 31, 2010 No Comments
Taxing You to Subsidize Businesses: An Economists View
November 2nd, 2009 — Budget, Taxes & Fees
States use Enterprise Zones to try to get businesses to move into economically depressed areas. There’s little evidence that they work. In Colorado it’s not even clear what they’re supposed to do.
We’ve designated three-quarters of the state as enterprise zones, including areas we claim we don’t want to develop, like the Roan Plateau.
University of Colorado Economics Professor Dr. Jeffry Zax has been studying enterprise zones, particularly in Colorado. He recently spoke to legislators in Denver. He also summarized his research for the DLC newsletter:
Governments offer lots of subsidies to private businesses. Just this week, the State of Colorado and the City of Denver agreed to $3.6 million dollars in subsidies for SMA Solar Technology. This amounts to $12,000 per job.
That’s a lot of money, especially when governments are cutting spending on their legitimate responsibilities. Is it well spent? Almost surely not. Government subsidies to businesses are the wrong way to encourage employment and economic growth.
The Colorado Enterprise Zones program, probably the most prominent subsidy of this sort in our State, is a good example. This program gives subsidies to establishments located in designated Enterprise Zones. Areas are designated as Enterprise Zones, at least in theory, because they seem to need help in order to achieve adequate levels of economic growth. Superficially, helping them achieve this through subsidies makes sense.
What do we know about how this program actually works? Establishments in Enterprise Zones don’t pay their workers any more than similar establishments outside of these Zones. For the most part, they have fewer employees. Moreover, fewer firms are born in Enterprise Zones and those that are there are more likely to disappear. In other words, Colorado Enterprise Zones arguably destroy both firms and jobs.
How can the effect of the Enterprise Zone program differ so greatly from its intent? The answer is simple. Economics. Imagine yourself as a business person when an Enterprise Zone is formed. You immediately recognize that Zone subsidies can increase your profits. So you move to the Zone. At least for a little while, you really are better off.
The problem is that you are not the only one who has noticed. Other businesses are moving to the Enterprise Zone as well. Your business and their businesses all need facilities in the Zone. The price of those facilities begins to rise. Some of the subsidies which drew you to the Zone are now being spent on rising rents and property prices.
Of course, as long as rents don’t absorb all of the subsidies, you’re still better off. Any other firm which moved to the Zone would be too. So they keep coming.
When do firms stop moving into the Zone? When they’ve driven property prices up so high that these prices cancel out the subsidies completely. It looks as though that process took only a couple of years in Colorado.
Workers would have had a similar experience. The first firms in Enterprise Zones enjoyed some nice benefits, and may have used some of them to hire workers and maybe even pay them more. But if they did, lots of other workers would have lined up for these jobs. Employers would have realized that they didn’t have to pay as much to get the workers that they needed. As rents began to rise, they would find that they couldn’t pay that much, either. In the end, increased supplies of workers and increased rents would ensure that wages in Enterprise Zones would be no different from wages any place else.
All this suggests that Enterprise Zone businesses would, in the end, look just like businesses outside Enterprise Zones. Why, instead, do they seem to have fewer workers and to be more fragile? They probably have fewer workers because Enterprise Zone subsidies for the use of capital encourage businesses to replace workers with machines. They are probably more fragile because they receive fewer Enterprise Zone subsidies as they age.
If, in the end, neither firms nor workers are better off in Zones than outside, where do all the subsidies go? We’ve already seen the answer. They go into driving up property prices. Even though the intent of these subsidies was to help businesses and workers, owners of property have to get all of the benefits. In other words, all of the money spent on Enterprise Zones is going to people who don’t need it.
This is typical for all government subsidies to businesses. There are two types of businesses, those which would be successful in Colorado in any case, and those which would ordinarily not be. There’s no point in giving money to the first type of business, because they don’t need it. Money given to businesses of the second type only supports those which are otherwise weak. This puts solid businesses at a disadvantage and retards, rather than encourages growth.
If the government can’t support the economy through subsidies to individual businesses, what can it do? It can and should provide the public goods and services which all businesses need to prosper: efficient transportation, good infrastructure, public safety and a well-educated workforce. If it did this, sound businesses would thrive without individual subsidies. We wouldn’t want any businesses which still needed those subsidies to survive.
Zax’ last point is particularly poignant; we’re adding new tax breaks for businesses even as we’re cutting education, public safety and all of the other services states generally offer to their citizens.
Of course the argument in favor of special interest tax breaks is always that they create jobs. This data is from the last recession, but it shows that cutting taxes doesn’t save or create jobs.
November 2, 2009 1 Comment
Which States Tax What
October 20th, 2009 — Taxes & Fees
I’m not sure what this means, but the Stateline, using data from the Tax Foundation, has put together a table that shows what portion of their revenue states get from various taxes.
October 20, 2009 No Comments
