Earlier this month, my colleague Mark Robyn wrote a Fiscal Fact analyzing a package of bills in Colorado which eliminate certain exemptions and raise taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. es in a politically driven and unprincipled effort to cure the state's budgetary woes. As of February 10, the Colorado Senate approved nine of the bills from the package. As reported by Tax Analysts (subscription required):
The Colorado Senate on February 10 passed nine bills to suspend $132 million worth of tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. s.
The House, which had already passed the bills, must agree with Senate changes before Gov. Bill Ritter (D) can sign the bills into law. […] The bills, along with their Senate vote totals, are:
- HB 1189 (direct mail tax), passed 19 to 15
- HB 1190 (energy used in manufacturing), passed 18 to 16;
- HB 1191 (candy and soft drinks), passed 18 to 17;
- HB 1192 (downloaded software), passed 18 to 17;
- HB 1193 (Internet retail sales), passed 19 to 16;
- HB 1194 (food wrappers and napkins), passed 18 to 17;
- HB 1195 (agricultural products), passed 18 to 17;
- HB 1196 (alternative fuel cars), passed 18 to 17; and
- HB 1199 (business operating losses), passed 19 to 16.
All of the bills in the package expand the sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. base by singling out individual products for taxation, and at least four move in the wrong direction by including various business inputs (HB 1189, HB 1190, HB 1194, and HB 1195), standing against sound tax policy principles. The package also includes an amended Internet tax proposal (HB 1193) which we discussed here.
Colorado's lawmakers should not have evaluated these tax proposals based simply on how much revenue they can raise through politically expedient means, but instead should have based their evaluations on sound tax policy principles.Share