Has Colorado put out the “closed for business” sign?
Businesses across the state have recently been taken by surprise and alarmed by a package of bills proposed by the Governor and passed by the Legislature in record time, which took effect March 1. The bills were aimed at helping to fill the state’s current budget gap by eliminating or reducing state tax credits and exemptions for businesses in Colorado.
These measures have been used across our state for decades to help companies keep and grow jobs. The increase in taxes paid by the private sector as a result of this package will make it more difficult to keep jobs in Colorado and lure new ones to our State in the future.
We know that Colorado is facing unprecedented economic challenges. Unemployment statewide is 7.5 percent and locally it is 9 percent. We continue to hope that the state and local economy is positioned to return to stability and growth this year. However, the decisions we make now, in both the private and public sector, are critical to achieving that goal.
Colorado has very little ammunition to lure business. While other states are rapidly adding incentive packages to attract companies, we are removing several of the key provisions in our limited arsenal. As the country rebounds from the current economic woes, businesses are looking for opportunities to take advantage of an educated workforce and reasonable property costs.
They will be looking for additional incentives to relocate or expand their operations. Colorado will now have less to offer them based on the recent work of the Colorado General Assembly. In fact, we may have just put out the “Closed” sign in terms of the overall message we have sent business, particularly when compared with other states that are seeking jobs for their citizens.
We know the state’s budget problems are severe. We understand the challenges our elected officials face; the private sector has been experiencing and managing the very same issues. Nonetheless, it is short-sighted to balance the budget with one-time funding sources and the removal of economic policies that drive job growth and ultimately tax revenue.
Colorado’s business community contributed, in the past two years, more than $330 million in cash funds and forgone revenue with the repeal of the vendor fee ( a program where the state paid business to collect state sales tax, which business now does at its own expense) to shore up the state’s budget shortfall. This year, we will continue to do what we can to get our state finances back on track.
In the coming year, the $800 million dollar deficit in the Unemployment Insurance Fund will have to be replenished as well-state government does not cover that cost, business does. Finally, we expect we will also be paying an increased property tax rate due to plummeting home values and the constitutional requirement that business make up the difference in those property tax rates. All that, while trying to cope with the loss of revenue in their own businesses at the same time. The total cost of the actions taken previously by policy makes along with this anticipated deficit in the Unemployment Insurance fund will be well beyond $1 billion over a few short years. That was BEFORE this most recent action.
Business is already contributing to help the state close the budget gap. With this latest legislative action the primary job and tax generators of this State are being required to do even more. There will be unintended consequences. Dollars that could have gone into job growth will be going to pay sales tax on energy used to manufacture a ceramic component part at CoorsTek which must compete internationally for sales, or to pay sales tax on the takeout boxes that a Nick and Willy’s pizza comes in. Make no mistake this will affect the bottom line costs of many small businesses as well as large ones…at a time when they can least afford it.
If this recession has shown nothing else, it has shown the direct correlation between the fate of free enterprise and the fate of government budgets. One cannot help but wonder then, why lawmakers in this State choose to make it tougher for free enterprise to return to the profitability that will be required to in order to have more sustainable state tax revenues.
In 2010, as the Chamber and as the local business community, we will continue doing what we can to get our economy back on track. But we cannot do that alone. We, along with other business associations across the State urge our elected officials within the Colorado General Assembly to join us in this goal, to see business as the ally we are in moving this state forward and to partner to promote activities that lead to jobs for Coloradans.