HB20-1420 Adjust Tax Expenditures for State Education Fund by Representative(s) Sirota and Gray; als
HB20-1420 Adjust Tax Expenditures for State Education Fund by Representative(s) Sirota and Gray; also Senator(s) Moreno and Hansen
Rep. Sirota says this is a critical bill. The bill has been worked on by various members for a better part of the year. They are bringing a package of measures giving tax breaks to special interests and wealthy business owners, many of which they inherited from the federal government without any say. This is important to shoring up the most critical budget priorities in the state: education.
Rep. Gray says they don’t have great solutions to offer anyone. There is a public health pandemic and an economic collapse, but also a public education crisis. They are at a place right now where they will be telling the school districts to implement new and innovative solutions to have virtual learning, hybrid learning, or in-person learning. However, they don’t know which option they are going to have to go with. At the same time, they are cutting the budget for schools. The tax code is set up in a way that they generally accept whatever changes the federal government makes. In this case, they are going to reject some of the provisions from the federal government to give the schools the resources they deserve. One of the things they are going to reject is a tax cut on qualified business income. For people with larger businesses and still realizing a good amount of income, they need to make sure they are serving the schools for their kids. This isn’t an easy situation, but for those people still seeing a lot of income, they need to prioritize investing in their schools.
Rep. Snyder says this is a large and encompassing bill. There are parts of it not related to the Tax Cuts and Jobs Act or CARES Act. He wants to clarify that it isn’t all in response to federal changes. Rep. Gray says Rep. Weissman is 2/3 of the workload this far and is also able to answer some questions. Rep. Sirota says there are some additional provisions in the bill that touch on Colorado tax policy, which have also been reviewed by many people.
Rep. Sandridge says the bill will increase the tax liabilities to some businesses. He asks if they think increasing tax pressure could be counterproductive right now. Rep. Sirota says they have done a lot of due diligence in ensuring that it isn’t affecting small businesses, it is directed at the bigger companies that are seeing income still. There is a provision that talks about taxpayers making $25 million and up, so it is only for the really high earners. They are trying to ensure that they don’t see these devastating cuts to child education. Rep. Sandridge says he was talking about the big companies, like USAA, which has a headquarters in his district. He asks if they are concerned that it could motivate them to get up and move to a different state. Rep. Gray says this only affects Colorado state income tax, which is remarkably low compared to the federal income tax and other states’ tax rates. It will remain low in this bill. They have incorporated lower taxes based on coupled federal tax policy they have nothing to do with. The primary goal of this bill is to say that Colorado doesn’t agree. There is no one who decides to have their headquarters in Colorado because of the CARES Act because it didn’t exist, or because the tax rates are low. Rep. Sandridge says businesses look at the totality of tax breaks, and may leave if they feel that the taxes are no longer friendly towards businesses. He says states with 0% income tax rate are trying to steal the businesses in Colorado. This bill could be the thing that breaks them and makes them decide to go to another state. Rep. Gray says the zero income tax rates are probably not making money like Colorado is. This will allow them to add money to public education. Without this, they are asking teachers to take on more students with less pay. He doesn’t love what they are doing in this bill, he is there to govern. They would be asking teachers to do more while cutting their funds. The consequences of the public health crisis is to share sacrifice. It is the schools who will suffer. He went to the business community about the bill and talked to them about it. He knew they weren’t going to be excited about it. They aren’t filling the funding gap with this bill.
Rep. Bockenfeld says this bill is double dipping and going back to the taxpayers who have lost deductibility who will now be impacted again with this bill. He asks if he is wrong. Rep. Gray says there was already a negative factor in the schools, and the voters already said they needed their schools to be funded in a certain way. Even if this bill passes, they aren’t anywhere close to what the voters said they needed. This body has never taken accountability for not funding the schools at the standards the voters wanted. He doesn’t agree with the “double dipping” when even with both funding mechanisms, they still aren’t funding schools completely. Rep. Weissman says they are doing analyses on the industries in Colorado. The auditor finds that the employer in the insurance industry has growth, and overall job growth has increased by 82%. The rate reduction hasn’t caused the industry to go away. That particular provision has been wholly ineffective and quite costly during an economic crisis.
Rep. Champion is confused about how this can’t be a tax that shouldn’t go to the voters of Colorado for TABOR. He also says he understands that the state legislature gives a pot of money to the local school boards, and they determine who gets what funds out of the pot. The school boards determine how teachers are paid. Rep. Sirota says this doesn’t need to go to the voters because they aren’t increasing tax rates and they are under the revenue able to be attained by the state. Not every school board has flexibility, and this will impact students in poorer areas and students of color. Representative Gray referred Representative Champion to the Mesa County case decision as it relates to mill levies. It is true that all we do it say how much soup is in the pot and someone else decides how much to eat. However, when we go to the school districts and say you have 700 more mouths to feed and we are decreasing the amount of soup, that is not governing from us. Representative Gray believes in local control and he thinks the most profound abdication of power is that we decide how much soup is in the pot and then don’t take responsibility when there is less. So yes we have local control through our school boards but we hold the purse.
The local share of education funding used to be the primary but now the state share takes up more. Representative Champion said that the minority ran 40-50 amendments to provide enough soup for the pot for this coming fiscal year and they were turned down except for 4. It is still a tax and it needs to go to the voters.
Carol Hedges, Executive Director, Colorado Fiscal Institute
She thanks the sponsors for developing this important legislation. She is in favor of HB 1420 because it helps avoid budget cuts, it makes our taxes fairer, and it helps get cash in the hands of Coloradans who need it the most. What we need to focus on is the best way to help Colorado recover. The question is what is the most effective tactic. Based on what we know, the year after the recession is the worst year for budget cuts. We know current cuts are devastating. We know that higher income individuals recover their income more quickly than lower and moderate income individuals. We know that high income folks pay a lower percentage of their income in taxes. We also know that taxpayers of color are overrepresenting in paying the highest rate of taxes. Consumer purchases drive our economy and money from low to moderate income individuals goes through our economy more. Average state employee salary is $53,000. These are the folks we are talking about now having to cut and eliminate their employment. We know that closing these tax credits raises money to avoid the budget cuts we talk about. We know that this body didn’t chose most of this tax policy. We know the EITC is an effective tool to lift families out of poverty and we know the hardest hit industries are leisure, retails, and hospitality which tend to pay lower wages. We know that Coloradans overwhelmingly prefer tax changes on high income earner Coloradans. Tax cuts are not as effective or valuable as an economic stimulus as direct state investments. These credits impact mostly high income businesses. The Colorado Fiscal Institute urges a yes vote on HB 1420.
Amy Baca-Oehlert, President, Colorado Education Association
CEA represents over 39,000 educators across the state of Colorado. She is here to testify in support of HB 1420. During the great recession, education saw the brunt of the economic cuts Colorado had to make. The Budget Stabilization Factor is an IOU made to education from the state. This has led to devastating impacts we have never recovered from. A 10th graders in our system has never experienced a fully funded education. Colorado’s per pupil funding lags $2,700 below the national average. We have students that suffer from a lack of access to adequate mental health supports. We have the largest wage gap of educators through out the country. The list could go on and on. We have never recovered from these cuts. The current school finance act adds $577M to the BS factor making the BS factor a $1.18B. A BS factor will have real impacts on the education of Colorado students. Our responsibility to address the racist roots of the education system will require more resources not less. We understand that there are hard choices that have to be made and CEA has advocated for creative ideas. Our members have held roundtables across Colorado where we have stated that the legislature can’t just cut its way out of this economic crisis. It is a step to provide more equity into our tax system and $800M into state education. The current structure is crippling our state financially. We can no longer afford not to act. CEA will continue to engage in these policies that work to create a more equitable system.
Representative Weissman asked Ms. Baca-Oehlert if the BS factor is equal to $8B since it began. Ms. Baca-Oehlert said over the last decade it has accumulated to over $8B, yes. Representative Weissman said in the normal course of things we would be done by now and checking in with our districts. What is the conversation among teachers and education professionals about the fall? Ms. Baca-Oehlert replied she can speak from her personal experience and then what she is hearing from her members. There is a lot of fear and anxiety about what the fall will look like. As she stated, we have many devastating consequences to our public schools due to the negative factor and many of our educators don’t know how they will return in the fall with the increased needs but less money. There are students that have experience significant trauma and so has our state. To think we would have to cut our mental health supports, to think we have to cut nurses, paraprofessionals, and all the workers that provide education to our students is unfathomable. To think we have to cut custodial services even though we need to deep clean our schools is crazy. We could probable talk about this for hours but the picture is clear – students and educators are dealing with desperation, anxiety, etc.
Representative Weissman said the DOR does annual tax expenditure reports and they are backward looking and it takes a while for the statistics to come out but the lowest income group had the highest tax burden and the highest tax bracket had the lowest tax burden. Does this square with what your organization tracks? Ms. Hedges said we work with a national partner so our numbers are different and we provide the offset to subtract federal income taxes. We are looking at similar numbers in terms of the relationship. The analysis her organization has done is overlapped with racial data on top of that analysis and it found that in the categories of income that pay the highest percentage of taxes, folks of color are overrepresented compared to the population and the opposite is true when we look at high income. This is a function of our heavy reliance on sales tax. Many other states have a graduated income tax.
Representative Sandridge said in this bill, there is no guarantee that a dime goes to teacher pay or saving a teachers job. There is no precautions on using this money for a new administrator. Ms. Baca said out school districts are starving and they know the realities that our districts have been living under. They can’t stretch the dollars that aren’t there. We do believe in local control. You allocate the money and then school districts in conjunction with their educators decide how the money is spent. They can not make money go places when they do not have the money. They feel just as adamant about getting money into the system. We are working with our school districts on this. Maybe local districts have passed mill levies. This has created an unequitable system of haves and have notes. So although the bill doesn’t mandate it, we do have faith in trust that our school districts will work with us to allocate that money appropriately. To be a state where half the school districts are on a four day week is just devastating.
Ms. Hedges said she learned nothing is guaranteed in this life and nothing is more true than where we are economically today v. 8 months ago. She also added that the analysis her organization has done has focused on what is the best tactic to recover economic vitality in the state. We have compared savings rates and spending rates and what we know is that the money circulates most when it is in the hands of moderate and middle income workers. A portion is going to the state education fund and the general fund. She trusts that our elected officials
Garin Vorthmann, Colorado Farm Bureau
The Colorado Farm Bureau is here to testify in opposition to HB 1420. This bill is too far reaching. The Farm Bureau is the state’s largest agriculture organization. Our members are small family farms and HB 1420 will have a dramatic impact on Colorado’s farmers and ranchers. Historic freezes has decimated the peach crop and the COVID supply chain has created a dark hole. The uncertainty is added onto an eighth year of declining income for agriculture. Net operating loss is common for farmers and ranchers. The tax treatment of net operating losses means something to farmers who make money some years and lose money other years. Farmers and ranchers operate on small margins. Furthermore, with the rewrite of 199A, if farmers/ranchers can’t exclude the first 20% of income and if they can’t deduct what they used in the past, they will see accounting profits on paper while actually experiencing a loss. The business income or pass through deduction is a way to encourage Americans to start small businesses. Removing it creates a disparity. The removal of the capital gains exemption could have consequences on beginning farmers. Older farmers also rely on this while selling their farms. The agriculture industry is already struggling to get by please vote no on this bill.
Jennifer Waller, President, Colorado Bankers Association
Ms. Waller is here to oppose HB 1420 on behalf of the Colorado Bankers Association and the Independent Bankers of Colorado. We are concerned about the impact on our customers. The bill does not impact only the rich or wealthy but businesses of all sizes. The net operating loss being capped at $400,000 is problematic. It is hard to determine how many jobs will be lost, we know jobs will. We believe most parents will want to remain employed. Passing a tax increase is counter-productive. We would urge you to not rush a bill that may jeopardize your constituents employment.
Kelly Sloan, Colorado Agricultural Aviation Association
The Association opposes this bill. We represent the states aerial applicators and our customers are farmers and ranchers you just heard from. We oppose several elements of the bill. We are especially concerned with the caps on the net operating costs. It doesn’t make sense that on years we are making less money we have to pay more taxes. We also don’t understand the permanency of the taxes. Instead of the solution being temporary all the provisions are permanent. We are also concerned about loss of deductions over $75,000 and $150,000. Many of our businesses are small operations and we represents the largest employers int he areas we operate. We are small businesses and it isn’t unusual for us to make over the caps. We also have much higher expenses. Capital purchases in terms of aircraft cost higher because the load capacity is less than at sea level. Life insurance for our pilots is expensive so when you add an additional tax burden, that will be catastrophic to our members. We also can’t pass along these costs to our members because they don’t have extra money. In closing, we oppose this bill and ask for a no vote.
Patrick Boyle, Colorado Competitive Council and American Property Casualty Insurance Association
We believe it is unwise to raise taxes on business during a depression discouraging them from making the investments and hiring decisions to drag our state out of the fiscal crisis. Earlier this year there was a bill carried that touched on the industrial energy sales tax exemption. Their bill would have strengthened the requirements to apply for the exemption and this bill eliminates all together. There has been an exemption for industrial energy to encourage manufacturing and to avoid pyramiding of taxes. When you tax industrial energy you tax a component of the production process. This bill, by imposing this tax, will discourage investment in manufacturing and make us less competitive. It will also discourage reemployment of the workers we need. The insurance premium tax credit home office is intended to encourage the location of insurance companies in Colorado and has done so successfully. They generate much more in payroll for the state then what is lost by the modest reduction in tax they qualify for. Removing it discourages people from having these offices here. They are highly portable offices. The net operating loss would make us the strictest state in the union basically removing it all together and undercutting businesses that were relying on carrying forward years of losses and when they become profitable use those losses to offset the income taxes.
Rep. Sandridge said the proponents are sharing that this tax incentive plays no part in business and attracting businesses to Colorado, are you saying it does benefit the businesses you represent? Mr. Boyle said when questioned by the state auditor the representatives of the companies that have regional or home offices in many cases did not respond. Those that did said it played some role in their locating their businesses here. Internally, we believe it plays a significant/substantial role to encourage businesses to locate in this state. There are regional home offices in this state.
Rep. Snyder asks when is a good time to raise taxes on corporations and wealthy organizations. Mr. Boyle is glad he separated the two. It will discourage the rehiring for people currently out of work. Those businesses aren’t necessarily wealthy people. He says it would have made more sense to increase taxes during a boom. They should encourage investments. Rep. Snyder was just commenting on how it seemed that he was opposing all tax increases, ever. He says this bill have a lot of moving parts. It isn’t the way he generally likes to do things. Many of these provisions have a means testing quality and try to set the limit. He asks how Mr. Boyle doesn’t see this as trying to level the playing field. Mr. Boyle disputes the characterization as corporation as wealthy corporations. They are investment vehicles for pension funds. That sort of conflation of wealthy with corporation discourages him because they would have a different discussion if this bill were about raising taxes on wealthy people. Instead, they are talking about raising taxes on businesses that employ people.
Rep. Weissman asks how he can support the idea of not having $1 million taxes on corporations, when there is no data to support that not increasing taxes creates or keeps jobs. Mr. Boyle says the home office credit has not been the subject of legislation in some time. They are making a bet that corporations that provide high wage jobs will make the decision to stay here as opposed to moving. Rep. Weissman prohibits carryback on net operating losses. About 8,500 corporations claimed net operating loss. The policy isn’t that they don’t get to claim net operating loss, they get to carry it forward as many years. It is an entirely legitimate policy because business is cyclical. He thinks it is a legitimate policy choice to say they should be able to offset good years with the bad years. Of the 8,500 that claim net operating losses, 98% of those businesses that claim net operating losses are unimpacted. The bill by the sponsors is trying to be a measured approach. Mr. Boyle says most businesses are small, and it is true that most of the impact that he is concerned about in net operating losses is because of larger corporations, which provide primary jobs. He is concerned that if they can’t rely on the state of Colorado that they will choose to go elsewhere to a more stable environment. Rep. Weissman clarifies says that the bill proposes to convert an exemption into a credit.
Rep. Bird asks about overall tax burden in Colorado for the businesses, relative to other states. Mr. Boyle says the industrial energy sales tax exemption will impact capital intensive businesses. Colorado has among the lowest residential property taxes, but it is the opposite for commercial property tax rates. Rep. Bird asks about tax changes for life insurance companies, and asks if there are any other states that give preferential tax rates to have a headquarters in the state. Mr. Boyle says yes. Rep. Bird asks about annuity plans and annuity consideration and is concerned about preferring some retirees over others. Mr. Boyle says he doesn’t know much about that. Mr. Sloan says they are sensitive to competitiveness since pilots can operate around the country. They are also subject to a lot of higher expenses than other industries. They are sensitive to changes in tax policy because it adds to the burden. It isn’t unusual for them to have years where they can suffer net operating losses of $400,000 or more.
Rep. Benavidez says they are referring to the annuity contracts that are not bought after winning the lottery or in situations like that. She talks about net operating losses showing and that the chart shows that there is only 185 businesses that have an average annual deduction of $400,000. The rest of them are less than that. If businesses are doing well, they are buying up the losses and using it. Small businesses aren’t included in this. They can carry the net operating loss forward for 20 years. It really addresses larger businesses. They didn’t have the chance to narrow it further in the Interim Committee. The Committee also discussed removing the industrial energy sales tax exemption, but didn’t get the chance to do that. Insurance companies also pay federal tax on their insurance premiums, and Colorado has a lesser tax rate by 2%. She asks if there really been a value put to the amount of that credit. Mr. Boyle says that is an existential question. The cost of the home office credit is quantified in the fiscal note. They continue to believe it does benefit the state to have it. Rep. Benavidez says that was her question. What is the value of having an office? Mr. Boyle says he can give them statistics with the economic impact of the regional headquarters offices and their payroll. They would have to make the decision whether the risk of losing that is real and substantial and what it would cost them. He can’t tell them that they would move. It isn’t a way of making it fair, it is a way of discouraging or encouraging investment.
Rep. Champion says there are 185 that have $400,000 net operating losses. He asks how many people those 185 businesses employ in Colorado. Mr. Sloan says he can only speak for his industry, where most of the businesses are very small. Even in the small businesses, they could still be the biggest employer in the town. If they go under or move to another state, it would greatly impact the town. Rep. Champion asks if companies considering coming to Colorado don’t understand the tax burdens, that would put a black mark against the state. Mr. Boyle says that is correct.
Loren Furman, Colorado Chamber of Commerce
She is disappointed about how this bill has preceded. It has enormous repercussions for businesses across the state. There are changes that are unimaginable for the small businesses in Colorado. This bill ends the deduction created purely for small businesses and not available for large businesses. The purpose of the net operating loss is to help businesses get relief on the losses in future years. They are making those investments this year and are trying to keep their businesses afloat. The 2009 recession tried to address the same issues and eliminate the tax exemptions. Over the last 2 and a half months, business representatives have been talking to leadership about how they can collaborate, and this bill has never been mentioned. She is disappointed that the sponsors didn’t work with the business community.
Ryan Woods, Colorado Chamber of Commerce Tax Council
They oppose the bill because of its negative impacts on businesses in the state. It hits taxpayers at exactly the wrong time with increased taxes. The limits on the industrial use exemption violates one of the core principles of the sales tax, which is that they don’t impose the sales tax on inputs of the business when the outputs of the business will be subject to sales tax later down the line. It prevents them from compounding taxes. The Department of Revenue has a backlog of refund claims, so it can take 3 years or more for the business to receive action on the claim. With the added credit from this bill, the wait time would be even longer, negating any benefit the legislature believes they will see.
Rep. Gray says HB1230 was introduced in this body that involved the 2017 tax act provisions and was rolled into this. There weren’t hearings for the CARES Act before suspending because it wasn’t in law until they suspended the legislature. He tried to explain the provisions of this bill to Ms. Furman last year as best he could in an effort to get information about what was planned about this bill. He asks if those facts agree with the facts that she pointed out. Ms. Furman doesn’t think it is appropriate to discuss the meeting because there was not much information. They didn’t get 48 hours notice before it was introduced and in committee, but they asked for it. When they received the bill draft, it was more than what he discussed.
Rep. Sandridge asks if they would feel more appropriate if this bill was introduced in January so they could be more involved in the specifics and dialogue. Ms. Furman says that they would prefer to have time to work through the details on the bill. Rep. Sandridge asks about the publication going around saying that these tax incentives play little to no role in attracting businesses. He asks for examples of how this can help or hurt. Ms. Furman says the number of emails she has been receiving is dramatic. So many businesses are upset. The changes to the net operating loss, home office tax credit, and energy credit are the main topics of the emails. It is very clear that these changes will be dramatic.
Rep. Weissman asks if any of the states without exemptions are in Xcel’s territory. Mr. Woods says the only one he knows of in their service territory is New Mexico, and that only applies to utilities. New Mexico has a very different tax system.
Rep. Benavidez says there are only 16,000 businesses of over 600,000 businesses that take the credit. In 2010, the tax was suspended for more than two years. She asks what happened to those businesses in that time. Mr. Woods says the situation was different because all of the businesses could see there was an end in sight for the exemption.
Sam Bailey, Economic Development Corporation
They oppose the bill because it will be damaging to the economic development. Existing businesses don’t have clarity on the bill that didn’t have any stakeholders involved. In combination with other policies, it creates further economic uncertainty for businesses. The existing companies are at stake with the bill and its new tax policies. In 2019, they lost 300 jobs when there was a new tax policy and two companies who decided to merge.
Stan Dempsey, Colorado Mining Association
They oppose the bill, especially the sales and use tax exemption change. They have three mines that announced recent furloughs or layoffs, so this is a bad time to add more costs. Adding more costs would result in more layoffs. The exemption has existed since 1935, and when the state auditor renewed the exemption for energy, they said it met the expectation for the original intent for the exemption. This is a fundamental pillar for good tax policy. They urge the legislators to get this stuff right. Now, people would have to apply to get the refunds, where they would just be exempted before. This isn’t an exemption they should means test. He didn’t hear the Department of Revenue say there was an issue with compliance on the exemptions.
Rep. Weissman says the drafter flagged the issue of the diesel and they are working to clarify that. Mr. Dempsey says they didn’t understand that part.
Rep. Benavidez says there are a lot of businesses that are struggling and many people might not be hired back. She asks how they evaluate the employee losses and attribute them to whether it is the pandemic or another reason. Mr. Bailey says some of this is still forward thinking. Those companies that are generating a loss are still employers, and if those employees aren’t paid the quality wages, they might be relying on unemployment benefits. To account for the job loss, they do industry interviews. They encourage the legislators to do interviews with leaders of the industries. The pandemic has shown that companies are increasingly mobile. They will continue to track it if the bill passes. Rep. Benavidez says they are just estimating, but don’t have a direct idea of how it would impact job losses. Mr. Dempsey says when they combine a changing and volatile market, a company might eat the costs or pass it on. His companies ate the costs. Mr. Bailey says the insurance industry are based on corporate income tax credits. They consider more incentives to be in one location versus another. He says this bill also estimates the impact on small businesses.
Tony Gagliardi, Colorado State Director for National Federation of Independent Business
They oppose the bill. Their members operate businesses in every imaginable industry and are typically small. Small businesses continue to navigate the landscape of the new economy, and consumers are still uncomfortable with buying at the businesses. Now is not the time for extreme changes to the taxes. The savings in tax liability is reinvested into the business. Small businesses would have likely continued to perform really well if there hadn’t been a pandemic. They are asking the businesses to hire people back and make safe environments while imposing more taxes.
Keith Mancini, Empower Retirement
They oppose the bill. During the pandemic, the company and the associates contributed a lot of money to charity and gifts. They also pledged to not lay off a single person. This bill would burden Colorado-based companies, especially ones working to provide guarantees to their customers and workers. This bill is a double-whammy. They need to be able to operate without extra taxes and the net operating losses.
Rep. Snyder asks Mr. Mancini if he is mostly concerned with the home office 50% reduction in the premium tax. Mr. Mancini says the annuity tax is more concerning for them. Rep. Snyder asks about SB215 and if it is just for health care providers or insurance companies. Mr. Mancini says he doesn’t know if it has an impact.
Rep. Sandridge asks if withdrawing the tax exemptions would help or hurt for expansion in Colorado. Mr. Mancini says they are a growth company. They want to expand in Colorado, but the impact would be great and they wouldn’t be able to expand.
Rep. Weissman asks why should the annuities exemptions continue to receive the same tax treatment. Mr. Mancini says they are in an extremely low interest rate environment. The ability to offer these products is predicated on there being no obstacles. The change in the annuity exemption is the obstacle.
Scott Wasserman, Bell Policy Center
They support the bill. The 2010 bill that Ms. Furman referenced had almost the exact same arguments then and today. They heard that the sky would fall and it would cripple the economy, but they found that Colorado had the number 1 economy. However, the public funding levels lagged. At the time, he was hearing that the reason why businesses were struggling recruiting to the state was the lack of higher education, and the mediocrity of the public education. He says what got lost in the situation is that they got comfortable with the fact that they are cutting the budget by a lot. They could have heard from multiple constituents about how these new policies are going to change their lives. He says this bill is very modest. He is hearing that the public sector takes, and the private sector generates. They are going to witness the budget cuts and it will affect business. He urges them to vote yes. Colorado has a regressive tax system and he thinks these are modest tax changes. Tax breaks are not a given, they are a choice that the General Assembly makes. He asks them to close a tax break now to offset a cut later.
Rep. Weissman says these are technical cleanup amendments. He moves Amendment L001. The Amendment passes with no objections. He moves Amendment L002. It is technical cleanup language. Rep. Benavidez asks what the section that is being repealed. Rep. Weissman says page 7 line 14 is going to go in. The Amendment passes with no objections.
Rep. Sirota appreciates everyone’s time today. She thinks there was quite a bit that was compelling about Mr. Wasserman’s closing remarks. They have asked people across Colorado to make a number of cuts, and they need to look at the entirety of the tax code to make sure they are putting the supports where it is needed most. Right now, that is K-12 education. They just inherited the CARES Act a few months ago, and were given little time by the federal government to work on it. They have means tested the provisions and applied credits for those who meet the needs. They are happy to continue conversations to discuss the bill.
Rep. Gray says they aren’t saying that this is not a hard time for anyone. The budget has to be balanced and they have to make cuts. Those cuts are visible. For the teachers, it means they are being told to set up the new school environment while taking a pay cut. It isn’t fair to say that because it isn’t great for everyone that the public educators have to feel all the pain. This isn’t his favorite bill, but it says that they will all share the burden and sacrifice.
Rep. Gray moves the bill. Rep. Weissman says he hears about having good schools for kids, which means teachers who are paid enough to afford housing close to the school and to not have overcrowded classrooms. This enables generations to move up the ladder. Not everyone recovered from the last recession equally; the people who were already struggling are still recovering. Rep. Benavidez talks about the earned income tax credits, which no one talked about. The state has a right to look at all of the tax measures coming from the federal government and decouple it. There are businesses that are going to fail and have losses. A net operating loss is only good against an increase or an income. These cuts are prudent and pragmatic in light of the pandemic. Rep. Snyder says this is also a great time of opportunity. He says there is no chance of traditional stakeholding because they need to address the needs of the state quickly. He asks the sponsors to be open to more amendments on the floor and hear more of the concerns. Rep. Gray says they will continue having those conversations. He feels they have had more discussion on this bill than any other bill in this period right now. He wants to give the bill as fair a process as he can without saying that the same people have to deal with all of the cuts.
Rep. Bird underscores the point that Colorado still hasn’t completely recovered from the 2008 recession. It shows that there is something wrong with the tax policy. She knows how hard this conversation is and this is the other side of the coin. This is the environment that they are in. She supports economic development but she can only responsibly vote for those things when they can afford it, and they just spent $3.3 billion out of the budget. They can’t afford what they have been doing. She will be voting for the bill.
The bill passes 7-4 with Reps. Bockenfeld, Champion, Sandridge, Will voting no.