Colorado lawmakers searching for more revenue this year looked at eliminating a host of tax credits and exemptions that, added up, cost the state nearly $2 billion a year.
But while they eliminated two tax breaks from the dozens of credits and exemptions on the books, they also added at least three new credits, two rebates and one exemption. And they approved a hefty tax incentive for tourism projects.
House Majority Leader Paul Weissmann, D-Louisville, said it was “inconsistent” for lawmakers to approve new tax breaks as they were examining getting rid of some existing ones.
“I think until we get our fiscal house in order, it’s irresponsible to pass tax credits,” he said.
Others said that in some cases it made sense to approve incentives to stoke economic activity during a recession.
“There are some that are good policy,” said Rep. Mark Ferrandino, D-Denver, who supported some new tax breaks. “We need to look at all of them and see which ones make sense and which ones don’t.”
But he added, “Every time we vote for these things, we’re giving away money and hurting our state coffers.”
Facing a $1.4 billion budget shortfall over two years, lawmakers this year examined a list of nearly $2 billion in tax credits and exemptions.
The list included tax exemptions on goods and services ranging from newspaper ink to Internet access to bull semen.
Lawmakers ultimately eliminated the sales-tax exemption on cigarettes for two years, generating an estimated $30 million, and permanently nixed the tax exemption for capital gains on Colorado assets, raising an estimated $7.1 million.
But they also passed bills growing the list of tax breaks and incentives, including:
• An income-tax credit for companies that create at least 20 new high-paying jobs. The credit would cost the state $2.9 million next year, growing to $21.3 million by 2013.
• An income-tax credit for so-called “angel investors” who help start up companies that produce new and innovative products and services.
• A tax rebate for purchases made by clean-technology and medical-device companies on items ranging from lab equipment to computers.
• An income-tax credit for people who donate water rights to the Colorado Water Conservation Board.
• A partial sales-tax rebate on semis and parts and an expansion of an existing enterprise-zone tax credit to include commercial trucks.
• A bill that would allow for up to $50 million in state sales-tax revenue generated in a tax-increment financing district to be devoted to public improvements to help build tourism projects. Supporters touted the measure as a way to help lure a NASCAR racetrack to the Denver metro area, but have also said it could assist in building venues to attract the Winter Olympics. Detractors called it the biggest special-interest giveaway in state history.
Proponents of all the tax credits, exemptions and other incentives typically argue that revenue created by increased economic activity offsets any decrease in tax collections.
Sen. Al White, R-Hayden, sponsored the bill creating the tax credit for water-rights donation, saying it would promote recreational activities.
“If we can incentivize these people who own rights (to donate),” he said, “we’ll all benefit from those recreational opportunities.”
Then there are skeptics in the legislature.
“There’s a substantial number of people that believe that economic activity can be stimulated by handing out tax benefits,” said Rep. Joel Judd, D-Denver. “Then there’s others of us that say there really isn’t any evidence that supports that.”
But Judd has been conflicted at times. Though he opposed the tax incentives for tourism projects, he has supported credits for historic preservation.
He said he tried to support only tax incentives that benefit “the general welfare of the people of Colorado.”
Tim Hoover: 303-954-1626 or thoover@denverpost.com
