“Oh, dear!” said The Cat. “You did not like our game…
“Oh, dear. What a same! What a shame! What a shame!”
Yesterday, after hours of debate, the so-called Tax Fairness Act (HB20-1420) passed the Colorado House of Representatives and headed on its way to the Senate.
From a email sent out by the left-leaning Colorado Fiscal Institute yesterday:
We’re one step closer to ending tax breaks that overwhelmingly benefit the top 5% in Colorado, helping fix our unfair tax code, and offsetting hundreds of millions of dollars in cuts to education…
The bill will be heard in Senate Finance Committee as soon as tonight, but it’s not a guarantee it will pass. That’s why you need to reach out to the Senate right now. Even if you’ve already contacted the House, take a few minutes to tell the Senate and Gov. Polis that the time has come to clean up our tax code, end loopholes that help the rich avoid paying hundreds of millions in taxes, and make sure the legislature does everything in its power to stem the coming cuts to our communities.
House Bill 1420 would revoke certain new tax breaks created by the federal CARES Act and the 2017 tax cuts signed by President Trump, and would also reduce existing state tax credits for certain industries. The nine tax breaks mentioned in the bill, if discontinued or changed, might generate $1.6 billion in additional revenue… over the next four years.
The proposed rules are projected to generate $248 million in general fund dollars in FY2020-2021. About $150 million would go into the state education fund on July 1, 2021.
The problem being that the COVID-19 recession is projected to create a $3.3 billion deficit for the state budget in the first year alone, FY2020-2021.
Here’s an annual tax revenue forecast for Colorado’s budget, provided by the Colorado Legislative Council… if House Bill 1420 is signed into law. At the moment, it seems to be a big “IF”.
A nonpartisan legislative analysis indicates some interesting nuances to the bill, according to a June 10 article by Jesse Paul and John Frank in the Colorado Sun.
Less than half of the new revenue expected to be generated in the next four years, or $750 million, would go toward schools. All other dollars would go to the general fund, the discretionary spending account lawmakers allocate each year.
After the four years are up, starting in the 2025-2026 fiscal year, the state is expected to collect $230 million a year through the eliminated tax breaks . None of that money is earmarked for education.
Democrats used a similar strategy during the Great Recession, says the Colorado Sun article, to generate more tax revenue, when they repealed or reduced “more than a dozen tax breaks” to generate about $700 million in additional taxes. Most of those changes, in 2010, were temporary.
HB 1420 would end many of the tax breaks for good, according to the Sun article. But things may not look so hopeful for the House Democrats who fended off a four-hour filibuster to get the bill approved. Governor Jared Polis is threatening to veto the bill, should the Senate decide to approve it.
“I don’t see a route for the tax bill to become law,” Polis told reporters, stating that his door is open to talking to Democrats about possible ways to make HB 1420 benefit workers and businesses — to make it into a “pro-business package,” in other words.
But “at this point, I’m not optimistic,” he said.
The Governor has been advocating an income tax break for the past two years, and had suggested that fixing special interest tax loopholes could fund a lower income tax rate. HB 1420 would direct the “extra” money elsewhere.
Republicans did win one concession from Democrats, with an amendment to exempt those who file a federal Schedule F with their tax returns. That group includes farmers, ranchers and others engaged in agriculture, such as greenhouses, nurseries and orchards.
Various business groups worked to defeat the bill in the House, and will no doubt continue their campaign as the Senate takes up the issue. But only a couple of days remain in the 2020 legislative session. And a Governor’s veto, taking place after the end of the session, would be impossible to overturn.
We’re all waiting — some patiently, some not — for the COVID-caused economic disaster to come to an end, and for things to get back to ‘normal.’ The efforts by the Colorado General Assembly to find ways to mitigate a projected $3.3 billion hole in the state government’s budget — like HB 1420, and the newly-passed Senate resolution that has put repeal of the Gallagher amendment on the November ballot (as discussed in Part One) — aim to keep things as close to ‘normal’ as possible, while we wait for the storm clouds to pass.
But as many commentators have warned us, we may not ever get back to “normal’.
We may be looking at a permanently changed world, where people mostly stay close to home, and where governments and businesses and families make do with less money. Perhaps, where we make do with less reliance on debt-based spending.
Where we reduce, reuse and recycle, not because it’s politically correct, but because it’s absolutely necessary.