Colorado lawmakers look at ending some tax breaks
July 13, 2009
DENVER (AP) – Colorado lawmakers are taking another look at ending some tax breaks to help ease budget cuts.
The state has 71 tax breaks and credits worth nearly $2 billion a year. There’s an exemption for bull-semen sales, which cost the state $3.2 million this year, and $600 million in breaks for manufacturers who buy component parts.
There are also tax breaks for enterprise zones, which cost the state $50 million a year. The intention is to help attract businesses to “economically distressed” areas but the zones now cover about 70 percent of the state.
The Fiscal Policy Institute wants lawmakers to modify at least six tax breaks, policies which other states have changed to plug budget shortfalls. The group’s suggestions include limiting the amount of money companies can earn by carrying net losses forward for 20 years to offset taxable income. California suspended its net operating loss deduction and expects to bring in $1.8 billion over two years.
Business groups say the state should carefully consider how such tax changes will affect struggling businesses.
“There are long-term impacts associated with each choice the assembly might make, and some of those tax credits have direct relationships to job growth,” said Tamra Ward, senior vice president for the Denver Metro Chamber of Commerce.
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Lawmakers voted to end two tax breaks this year.
They got rid of a state sales tax exemption on cigarettes to raise an estimated $30 million a year to balance the budget. They also got rid of a deduction for capital gains earned on Colorado assets, which is expected to bring in an estimated $7 million the first year.
Legislative economists estimate that this year’s budget needs to be cut by $838 million because tax revenues have dropped off more than expected. Lawmakers are out of session and Gov. Bill Ritter plans to close that gap by cutting an average of 10 percent from state agencies, focusing on eliminating the least efficient and effective programs.
However, Sen. Moe Keller, the chairwoman of the Legislature’s Joint Budget Committee, estimates this year’s shortfall could exceed $1 billion because demand for medical care, prisons and education may surpass estimates.