Colorado Springs Business Journal Highlights Tax Foundation Report on Colorado Tax Proposals

By Amy Gillentine

"Clamping down on small business"

Business tax legislation has small business owners and leaders wondering how they'll manage the additional fiscal burdens. ...

Even nonpartisan groups question the decisions behind some of the bills. The Tax Foundation said several of the proposals were moving the state in the wrong direction.

"Re-examining some of the nitty-gritty tax policies buried deep within state statutes is a good idea," said Mark Robyn, staff economist. "Target tax breaks for special interests, or 'tax expenditures' are really just government spending funneled through the tax code. But legislators should keep in mind that some tax exemptions exist to prevent economically damaging double taxation."

Robyn said much of the legislation—bills to expand the sales tax base—will result in double taxes, once at the production level and again at the retail level.

He points to bills that would tax direct mail advertising materials, fuels and electricity used in manufacturing, fast food containers and bags, and various agricultural products as examples of the wrong bills.

"While state tax codes are filled with many unjustifiable special interest carve outs, all tax scholars agree that business-to-business transactions should be exempt from the general sales tax," he said. "A properly structured sales tax applies to all consumer purchases, but not to business purchases. The purpose of this exemption is not to promote business in general, but rather to avoid the double taxation of some products."

Robyn said taxing inputs on their way through the production line is "economically damaging."

But legislators are heading in the right direction with a couple of the proposals, he said. The state is eliminating the alternative minimum tax, which would reduce tax complexity without sacrificing revenue and a bill to limit tax credits for fuel-efficient cars.

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