Ending tax incentives will hurt business
Elimination or suspension of tax exemptions, exclusions and credits proposed by Gov. Bill Ritter will harm businesses across the state and hamper job growth and economic recovery, according to a survey of companies by the Colorado Association of Commerce and Industry (CACI).
In December, CACI conducted a survey of businesses on the potential elimination or suspension of 13 tax provisions targeted by Ritter to raise $131.8 million to help balance the state’s budget for the fiscal year beginning July 1. On Friday, bills targeting these tax provisions were introduced in the Colorado House of Representatives. The House Appropriations Committee will hear the bills at 8 a.m. today in House Committee Room 109 as the legislative leadership fast-tracks the bills to send them to Governor Ritter for his signature.
Ritter said last week he had moved up the effective date of seven of the bills to March 1 to capture $18 million in new tax revenue before the current fiscal year (2009-1010) ends on June 30.
The following four tax provisions were identified by the 112 companies that responded to the survey as the most critical to their operations (the amount of increased taxes that companies would pay in fiscal year 2010-2011, according to the Governor’s Office of State Planning and Budgeting, is in parentheses):
37 percent –Elimination of software sales-tax exclusion ($15 million);
29 percent –Three-year limit on net-operating-loss (NOL) carry-forward to $250,000 ($22 million to $45 million);
29 percent –Two-year suspension of the exclusion of energy for industrial and manufacturing use ($48 million); and
25 percent –Three-year-limit on corporate enterprise-zone investment tax credit ($21.3 million).
In particular, the March 1implementation will place costly administrative burdens on companies force to comply with the elimination of the software sales-tax exclusion.
“Colorado businesses want to keep their workers employed and then lay the foundation for creating additional jobs,” said CACI President Chuck Berry, “But the legislative proposals to raise taxes on business at this time will only frustrate our job creators in their efforts.”
When asked what they would do if the incentives were eliminated or suspended, the firms gave the following responses:
72 percent — Halt or delay planned expansion of operations;
55 percent — reduce workers’ wages and/or benefits;
52 percent — Institute a hiring freeze;
50 percent — Lay off workers; and
21 percent — Relocate some or all operations to another state our country.
“The CACI survey shows that firms across the state are clearly going to be hurt by the suspension or elimination of these vital tax incentives,” said Loren Furman, CACI Vice President of Governmental Affairs.
Here are comments from several respondents:
Evraz Rocky Mountain Steel, Pueblo “The actions to suspend the current energy exemption and net operating loss credit represent significant changes in local cost structures that will negatively impact our ability to competitively price our product. As there are no other steel producers in Colorado, our competition will not be impacted and this will give them a cost advantage. In a time when margins are narrow or non-existent in the steel industry, a major change such as the items listed above may make the difference in success or failure and loss of jobs.”
Verizon Wireless, Greenwood Village “While we are empathetic to the state revenue situation, elimination of several of these exemptions would increase our cost to do business and in turn that will hinder our company’s ability to continue to make additional investments in the state.”
Rocky Mountain Natural Meats, Henderson “Currently, Colorado is a desirable place to do business, but these proposals will change prospective businesses’ opinion of our state.”
The responses to the survey came from businesses both small and large and in different sectors throughout the state. To obtain the report, visit the CACI website at: www.cochamber.com.