Colorado Senate Passes Tax Package

Earlier this month, my colleague Mark Robyn wrote a Fiscal Fact analyzing a package of bills in Colorado which eliminate certain exemptions and raise taxes 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 credits.

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 tax 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.